This paper investigates the causal effect of informal care on the mental health of caregivers and disentangles the mechanisms of such effect. Using 2011−2018 CHARLS data, the fixed effects and instrumental variable approaches was conducted to address fundamental endogeneity problems. This study found that there was no impact of informal caregiving on caregivers’ mental health in general. However, the intensity of caregiving was shown to negatively impair mental health. The impact of informal caregiving varied by kinship, cultural context, and residential area. Participation in social and exercise activities and life satisfaction mediated the association between the provision of informal care and caregivers’ mental health. Long-term care insurance and the provision of formal care substantially modified the negative impacts of informal caregiving.