Objective: To investigate the relationships between public stigma, stigma by association (SBA), psychological distress, perceived closeness, perceived heredity, and the type of family relationship among family members of people with a mental illness. Method: In this cross-sectional survey, data from 527 family members of people with a mental illness were analyzed. Results: Perceptions of public stigma were found to be positively related to SBA and SBA correlated with greater psychological distress and less perceived closeness. SBA also mediated relationships between perceived public stigma and psychological distress, and between perceived public stigma and perceived closeness. Further, among participants who reported SBA, immediate family members showed lower levels of perceived closeness than extended family members. Also, the perceived heredity of mental illness was associated with perceptions of public stigma and psychological distress. Conclusion: The findings suggest that family members of people with a mental illness could benefit from education on mental illnesses, their treatment, and the extent to which they are hereditary. Additionally, particular attention should be paid to the psychological needs that arise from being a caregiver of someone with a mental illness.