STUDY OBJECTIVE: To investigate adverse social consequences of limiting longstanding illness and the modifying effect of socioeconomic position on these consequences. DESIGN: Cohort study on the panel within the annual Swedish Survey of Living Conditions where participants were interviewed twice with eight years interval 1979-89 and 1986-97. Sociodemographic characteristics, self reported longstanding illness, employment situation and financial conditions were measured at baseline. Social consequences (economic inactivity, unemployment, financial difficulties) of limiting longstanding illness were measured at follow up eight years later. SETTING: National sample for Sweden during a period that partly was characterised by high unemployment and reduction in insurance benefits. Participants: Participants were 13 855 men and women, economically active, not unemployed, without financial difficulties at the first interview and aged 25-64 years at the follow up. MAIN RESULTS: Persons with limiting longstanding illness had a higher risk of adverse social consequences than persons without illness. The effect was modified by socioeconomic position only for labour market exclusion while the effects on unemployment and financial difficulties were equal across socioeconomic groups. CONCLUSIONS: Labour market policies as well as income maintenance policies that deal with social and economical consequences of longstanding illness are important elements of programmes to tackle inequalities in health. Rehabilitation within health care has a similar important part to play in this.