BACKGROUND: Privatisation and private sector practices have been increasingly applied to the public sector in many industrialised countries. Over the same period, long-term work disability has risen substantially. We examined whether a major organisational change--the transfer of public sector work to executive agencies run on private sector lines--was associated with an increased risk of work disability. METHODS: The study uses self-reported data from the prospective Whitehall II cohort study. Associations between transfer to an executive agency assessed at baseline (1991-1994) and work disability ascertained over a period of approximately 8 years at three follow-up surveys (1995-1996, 1997-1999 and 2001) were examined using Cox proportional hazard models. RESULTS: In age- and sex-adjusted models, risk of work disability was higher among the 1263 employees who were transferred to an executive agency (HR 1.90, 95% CI 1.46 to 2.48) compared with the 3419 employees whose job was not transferred. These findings were robust to additional adjustment for physical and mental health and health behaviours at baseline. CONCLUSIONS: Increased work disability was observed among employees exposed to the transfer of public sector work to executive agencies run on private sector lines. This may highlight an unintentional cost for employees, employers and society.