There is increased awareness of the role of the urban landscape in promoting walking to counter the negative health and wellbeing impacts of age-related immobility. Consideration of neighbourhood design is particularly relevant in the context of local urban regeneration projects, which are designed to have positive health and wellbeing outcomes. However, few studies explicitly investigate how the environment influences walking and wellbeing for older adults living in a deprived urban area. There are strong conceptual and empirical links between walking, the urban environment and mental wellbeing. Many studies have separately demonstrated pairwise associations between all three components. In this paper we address these three concepts empirically, using structural equation modelling to explore walking as a mediator between the perceived social and built environments and mental wellbeing for older adults in deprived urban areas. We found direct and indirect relationships between neighbourhood perceptions and wellbeing. Walking partially mediates relationships between social contact, neighbourhood quality, local amenity use, safety and mental wellbeing. Although neighbourhood problems and the quality of local services and amenities are associated with mental wellbeing, walking is not an explanatory pathway in our model. The relationship between walking and wellbeing is weaker than expected. While promoting walking as a means of achieving positive mental wellbeing among older adults is important for “active ageing”, it is also necessary to consider the context in which this takes place, recognising that walking is not the only potential causal pathway between environment and wellbeing. Where walking is relied upon for transport, the wellbeing implications may be more complex. Given the strong associations between car ownership and wellbeing, future research should explore whether mobility and accessibility, rather than walking itself, is more important for older adults’ wellbeing.