Background We wanted to investigate if firm downsizing is related to an increased rate of disability pensions among the former employed, especially for those with musculoskeletal and psychiatric diagnoses, and for those having to leave the firm. Methods Statistics Norway provided a linked file with demographic information and all social security grants from the National Insurance Administration for 1992–2004 for all inhabitants in Norway. Our sample was aged 30–55 years in 1995, being alive, employed and not having a disability pension at the end of 2000. Downsizing was defined as percent change in number of employed per firm from 1995 to end 2000. Employment data were missing for 25.6% of the sample. Results Disability pension rates in the next four years were 25% higher for those experiencing a 30-59% downsizing than for those not experiencing a reduction of the workforce. 1-29% and 60-100% downsizing did not have this effect. Stayers following down-sizing had higher disability pension rates than leavers. What we have called complex musculoskeletal and psychiatric diagnoses were relatively most common. Conclusion Moderate downsizing is followed by a significant increase in disability pension rates in the following four years, often with complex musculoskeletal and psychiatric diagnoses.