Treating mental illnesses in primary care is increasingly emphasized to improve access to mental health services. Although family physicians (FPs) or general practitioners are in an ideal position to provide the bulk of mental health care, it is unclear how best to remunerate FPs for the adequate provision of mental health services. We examined the quantity of mental health services provided in Ontario’s blended fee-for-service and blended capitation models. We evaluated the impact of FPs switching from blended fee-for-service to blended capitation on the provision of mental health services in primary care and emergency department using longitudinal health administrative data from 2007 to 2016. We accounted for the differences between those who switched to blended capitation and non-switchers in the baseline using propensity score weighted fixed-effects regressions to compare remuneration models. We found that switching from blended fee-for-service to blended capitation was associated with a 14% decrease (95% CI 12–14%) in the number of mental health services and an 18% decrease (95% CI 15–20%) in the corresponding value of services. This result was driven by the decrease in services during regular-hours. During after-hours, the number of services increased by 20% (95% CI 10–32%) and the corresponding value increased by 35% (95% CI 17–54%). Switching was associated with a 4% (95% CI 1–8%) decrease in emergency department visits for mental health reasons. Blended capitation reduced provision of mental health services without increasing emergency department visits, suggesting potential efficiency gain in the blended capitation model in Ontario.