Background: Uganda's Generation Z (born 1997-2012), representing 23% of the population, has grown up with unprecedented digital connectivity, creating carefully curated online personas that often mask authentic psychological experiences. With youth unemployment exceeding 13% and limited mental health infrastructure (fewer than 50 psychiatrists for 45 million people), the intersection of socioeconomic pressures and digital performance demands creates conditions for potential mental health crisis. Objective: This study examined the relationship between aesthetic digital persona construction and psychological distress among Generation Z in Uganda, identifying moderating factors and assessing implications for potential social crisis. Methods: A cross-sectional analytical study was conducted between March and August 2024 across four urban centers (Kampala, Entebbe, Jinja, Mbarara) with 498 participants aged 14-27 years who were active social media users. Multistage stratified random sampling ensured demographic diversity across socioeconomic strata. Data were collected using validated instruments including the Digital Persona Investment Scale (DPIS, α = 0.87), Depression Anxiety Stress Scale-21 (DASS-21, α = 0.91), Rosenberg Self-Esteem Scale (RSES, α = 0.88), Multidimensional Scale of Perceived Social Support (MSPSS, α = 0.89), and a digital literacy assessment tool. Statistical analyses included Pearson correlations, independent samples t-tests, multiple linear regression, hierarchical moderation analyses, and mediation analysis using PROCESS macro with bootstrap confidence intervals. Results: Participants demonstrated high digital engagement (mean 4.8 hours daily) across multiple platforms, with 48.4% showing elevated digital persona investment. Mean DASS-21 score was 28.4 (SD = 12.7), with 51.4% experiencing elevated psychological distress and 53.6% reporting low self-esteem. Strong positive correlations emerged between digital persona investment and depression (r = 0.48), anxiety (r = 0.44), stress (r = 0.41), and overall distress (r = 0.52, all p < 0.001). Participants with high versus low digital persona investment showed significantly elevated depression (12.0 vs. 7.8, d = 1.00), anxiety (11.1 vs. 7.5, d = 0.91), and stress (11.3 vs. 7.7, d = 0.86, all p < 0.001). Multiple regression revealed digital persona investment as the strongest predictor of psychological distress (β = 0.459, p < 0.001), explaining 34.8% of variance. Socioeconomic status significantly moderated the relationship, with low-SES youth showing the strongest association (β = 0.583) compared to high-SES peers (β = 0.299). Social support (β = -0.164, p < 0.001) and digital literacy (β = -0.131, p < 0.001) demonstrated protective moderating effects. Mediation analysis revealed self-esteem accounted for 38.1% of the relationship between digital persona construction and psychological distress. Conclusion: Aesthetic digital persona construction significantly predicts psychological distress among Ugandan Generation Z, with the relationship amplified by economic vulnerability and buffered by social support and digital literacy. The findings confirm a looming mental health crisis requiring urgent interventions targeting digital literacy education, community support strengthening, and platform-level reforms to protect Uganda's youth from the psychological hazards of curated digital performance while preserving beneficial aspects of technological connectivity.