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A few significant gaps remain in the literature on educational gradient in psychological distress. If and how education predicts distress for the elderly and whether this association varies by age, gender, and residence are relatively unknown. Using four waves of data with a total sample size of 46,736 from the Chinese Longitudinal Healthy Longevity Survey and applying the random-effect panel model and Heckman selection model, we found: (1) there is a persistent and negative association between education and distress among older Chinese; (2) education predicts lower levels of distress over time and this is particularly true for males, urban residents, and the young-old; and (3) the effect of education on distress is largely explained by health lifestyle indicated by a three-dimensional system of leisure-time activities. Our findings strengthen the external validity of the relationship between education and health and suggest the dynamic patterns on the subgroup variations within the association.