This paper studies the connection between multidimensional skill mismatch and labor mobility decisions, and the implications on the aggregate economy thereof. We show empirically that higher skill mismatch induces workers to move to a better matched job. Moreover, labor mobility helps reduce skill mismatch, especially for those previously with high skill mismatch. An equilibrium search model featuring skill mismatch and on the job search is developed. Quantitatively, we find that (i) skill mismatch has an important role to play in affecting the labor mobility decisions, as well as the aggregate economy, (ii) about two-thirds of the total skill mismatch can be accounted for by search frictions, which explain half of the occupational mobility and cost about 1% of the aggregate output and welfare, and (iii) aggregate productivity growth has positive impact on both the skill mismatch and occupational mobility.