John Byrne, director general of disaster management, says a needs-assessment conducted by the charitable organization at the behest of the federal government found the prolonged evacuation is taking its toll.
About 2,000 aboriginal people were displaced by the 2011 spring flood.
"We discovered there were quite a number of people who were distressed over ... being away from their comfortable environment," Byrne said Friday.
"It's a known fact that in disasters worldwide when people are faced with these disastrous situations and prolonged time away, it can lead people into despair and different forms of relief. It could be alcohol. It could be any form of things."
The Red Cross findings echo what aboriginal leaders have been saying for several years.
The evacuees, scattered around Winnipeg and other parts of the province, have been living in hotels and rental accommodation. At least one reserve, Lake St. Martin, has been declared virtually uninhabitable and officials have been working to find a new home for the First Nation.
It costs $1.5 million a month to provide food and shelter for the long-term evacuees and the bill has already reached $90 million.
Aboriginal leaders, including Chief Shawn Atleo with the Assembly of First Nations, have said the constant turmoil has been devastating. They say children have missed out on school and are being exposed to the dangers of urban life — alcohol, drugs and gangs — and residents are disconnected from each other and their traditional ways.
The Red Cross has just signed a formal agreement with the federal government to oversee aid for the evacuees starting in February. Beyond ensuring people have food and shelter, the Red Cross will try to address their emotional needs as well, Byrne said.
"People have come from communities they are very familiar with, and they're now in a very urban setting with all of the challenges and opportunities that come together with that," he said.
"When you are out of your environment as long as they have been ... there is a loss of hope. It has a strain on people's lives. It puts a stress on people."
A band councillor with Lake St. Martin said he couldn't talk about the new agreement and referred calls to Chief Adrian Sinclair who couldn't immediately be reached.
Manitoba Emergency Measures Minister Steve Ashton said the province's aboriginal people have been dealing with the trauma of chronic flooding for decades. The biggest floods in recent memory have disproportionately affected native communities, he said.
The federal government needs to invest in flood mitigation on reserves, Ashton suggested.
"First Nations continue to be the hardest impacted by floods. We have to make sure it doesn't happen in the future."
All parties are working hard to end this protracted evacuation, he added. But it's difficult since, in many cases, people don't have a home to go back to because of water damage and mould.
The Red Cross is taking over from the Manitoba Association of Native Firefighters, which said in the summer it no longer wanted to be responsible for the care of the displaced. The association's handling of the long-term evacuation has been criticized, with reports suggesting that the number of evacuees grew well after the waters receded.
One hotel owner complained that the association failed to pay millions of dollars in bills and a former employee of the association publicly accused it of squandering money on unnecessary overtime for relatives.
The organization is now being audited by Ottawa.
Aboriginal Affairs Minister Bernard Valcourt said the federal government's priority is "the health and safety of First Nations."
"That's why we have been working with the Canadian Red Cross to ensure evacuees continue to get the services and support they need until they can safely return to their home communities," Valcourt said in a statement.
Aboriginal Affairs and Northern Development Canada declined to provide anyone to talk about the agreement with the Red Cross.