The economic and social effects of the COVID-19 pandemic have been widespread but unevenly distributed among genders. The pandemic may have also affected men’s and women’s mental health differently. This study examined whether the pandemic had stronger adverse effects on women’s mental health than on that of men given that the decline of the labor market was greater for women than for men. Using data from South Korea (June/September/December 2020, N = 3000), we investigated the gender gap in mental health during the first year of the COVID-19 pandemic and its association with gender differences in labor market experiences. We employ the Blinder–Oaxaca decomposition method for this analysis. Although depression and anxiety increased among employed women and men during COVID-19, women showed lower levels of mental health than men. A significant portion of this gender gap is explained by women experiencing greater job loss, income reduction, and prohibition of remote work than men. We also find that women in their 30s experienced greater mental health problems than men of the same age even after controlling for other conditions. Overall, our findings show that a greater proportion of employed women than men experienced poor labor market conditions and increased family burdens during the COVID-19 pandemic, which contributed to women reporting worse mental health than men.