This study employed parallel growth curve modelling to examine the changes in both psychological distress and at-risk and problem gambling as a development process. We used a prospective longitudinal population-based study to provide further insights beyond treatment samples and cross-sectional studies. A secondary data analysis was conducted by extracting a sample of 3460 Victorian adults from the Victorian Gambling Study 2008–2011. Findings suggested that psychological distress was a consistent risk factor for at-risk and problem gambling, as measured by the problem gambling severity index (PGSI), after controlling for other risk factors such as sex, age, histories of at-risk and problem gambling, and the experience of trauma. A more rapid increase in psychological distress over time was related to a more rapid increase in the PGSI trajectory. It is concluded that this study supports a positive association in the development trends of problem gambling severity and psychological distress in individuals who engaged in gambling. The association persists after adjusting for histories of gambling problem risk and the experience of trauma in life. The implications of the study suggest addressing the comorbidity of problem gambling risk and psychological distress in treatment and prevention, and the development of dual-diagnosis treatment programs.