Objective: The vital role played by primary caregivers in caring for cancer patients is well‐recognized, but the caregiver burden and impact on family functioning to caregivers’ mental health is poorly understood. This study examined the prospective and reciprocal relationships between family functioning, caregiver burden, and mental health. We aimed to determine whether inferior family functioning and heavy caregiver burden act as risk factors for mental health, as consequences of mental health, or both. Methods: Participants were 187 primary caregivers of cancer patients. They completed questionnaires with standardized measures assessing family functioning, caregiver burden, and mental health. A quantitative longitudinal design and a cross‐lag model were used to test the reciprocal relationships between variables at three time points with 6‐month intervals during the first year of early‐stage cancer diagnosis and treatment. Results: Family functioning did not predict participants' future mental health, but their mental health state predicted future caregiver burden and family functioning. Caregiver burden also predicted participants' future mental health. There was a dynamic reciprocal relationship between caregiver burden and mental health over time. Conclusions: The findings of this study emphasize the adverse effects of caregiver burden and may contribute to shedding light on the distinct mechanisms that underlie the relationships between caregiver burden, family functioning, and mental health. Our findings indicate the necessity of developing interventions to reduce the burden of caregiving and to facilitate family functioning. They will provide direction for family‐centered nursing to meet primary caregivers' mental health needs in the care of cancer patients.