Final-year undergraduate students face a psychologically demanding period as they prepare to leave university and enter an uncertain labour market, yet evidence from Tanzanian private universities on this transition remains scarce. This study examined psychological adjustment among final-year undergraduate students transitioning from university to the labour market at the University of Iringa, Tanzania, guided by Schlossberg's Transition Theory and the Transactional Theory of Stress and Coping. The design used was a quantitative cross-sectional correlational design. A stratified random sample of 100 final-year undergraduate students completed a structured questionnaire comprising the Depression Anxiety Stress Scale, an adapted Perceived Employability Scale and the Brief Coping Orientation to Problems Experienced Inventory. Descriptive statistics and Pearson product-moment correlation were used to analyse data. Findings showed that psychological adjustment was predominantly poor to moderate, with anxiety the most pronounced difficulty; nearly half of respondents scored in the severe to extremely severe anxiety range and over half reported at least moderate depression. Perceived readiness for the labour market was generally moderate, with few students reporting high readiness. Higher perceived readiness was significantly associated with lower depression, anxiety and overall distress, while emotion-focused coping was significantly associated with lower distress; problem-focused and avoidance coping showed non-significant trends. The study concludes that the university-to-labour-market transition is a psychologically demanding period for many final-year students and recommends strengthening counselling services, expanding career development support and promoting adaptive coping skills to improve transition experiences.