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Discrimination is unfavourable treatment based on the prejudice one hold about other person. Indian society is characterized by the caste and caste based discrimination which can be seen in higher education system very clearly. Therefore, the study is intended to assess the effect of perceived discrimination on the stress appraisal among the students of higher education and its consequential impact on mental health. For this purpose, a sample of 720 students of under-graduate and post-graduate with diverse socio-economic background has been selected. The sample is taken from four universities of Uttar Pradesh by utilizing multi-stage-stratified systematic sampling method. By using SPSS, collected data is analysed and it is noticed that there is significant difference in the degree of perceived discrimination and stress appraisal of students which is mediated by caste, income of the family and age of the students. Higher level of perceived discrimination leads to higher stress appraisal. From regression analysis, it is prominently emerged that caste has significant explained variance on the stress appraisal. However, perceived discrimination also has significant predicting value over the appraisal of stress among the students of higher education. Altogether, perceived discrimination can explain 20.7 percent variance on stress appraisal when other independent socio-demographic factors are in control. This explained variance is significant statistically at 0.01level.