Introduction <p>Although Long-Term Care (LTC) benefits aging populations, evidence on government-supported LTC for socioeconomically disadvantaged older adults in low- and middle-income countries remains limited. This study examines how government-supported institutional LTC is associated with physical and mental health outcomes among welfare-dependent older adults in rural China.</p> Methods <p>A cross-sectional analysis was conducted among 313 welfare recipients aged 60 and above in Shaanxi Province. Health outcomes were assessed using validated measures of physical health (self-rated health, pain, functional limitations) and mental health (depression, anxiety, loneliness). Regression models and propensity score matching were used to examine associations, and potential mechanisms were further explored.</p> Results <p>Government-supported institutional LTC was significantly associated with better physical and mental health, particularly higher self-rated health (ATT = 0.177, <i>p</i> = 0.005; β = 0.079, <i>p</i> = 0.006) and lower anxiety (ATT=-0.288, <i>p</i> &lt; 0.001; β=-0.146, <i>p</i> = 0.016). Longer stays were associated with more favorable health patterns. Mechanism analyses suggested that these associations may relate to age-friendly environments, improved healthcare access, enhanced social participation, and better nutritional conditions. Heterogeneity analyses indicated the associations were stronger among older, illiterate individuals and those with family guardians, particularly male guardians.</p> Conclusions <p>This study provides robust empirical evidence of associations between government-supported institutional LTC and better health outcomes among socioeconomically disadvantaged older adults, highlighting its potential role in enhancing well-being in rural settings. These findings emphasize the importance of expanding equitable, integrated, and high-quality LTC services to support sustainable, person-centered aging care for vulnerable populations.</p>