Given the growing number of Muslim immigrants in Western countries, there is a need for research focusing on their psychological well-being and correlates. The present study investigated whether perceived discrimination is associated with depression and satisfaction with migration through the mediating role of several identity dimensions (ethnic, national, and religious) among 204 first and second generation adult Muslim immigrants living in Italy. They participated in structured interviews, and a multi-group path analysis model was conducted using Mplus. While the impact of perceived discrimination on psychological well-being was modest for first generation Muslims, in the case of second generation Muslims perceived discrimination was directly associated with lower psychological well-being (higher depression and lower satisfaction with the migration decision) and indirectly associated with satisfaction with migration through the mediation of national and religious identity. The higher the levels of discrimination that second generation Muslims perceived, the weaker their national (host country) identity and the greater their religious identification. In turn, national and religious identities were associated with respectively higher and lower levels of satisfaction regarding their migration decision. The findings showed clear differences between first and second generation immigrant groups, revealing that perceived discrimination represents an obstacle to integration processes more for second generation immigrants than for first generations.