The purpose of this study was to evaluate the influence of psychiatric symptoms and illness status on the health-related quality of life (HRQOL) of out-patients with Type I and Type II diabetes mellitus. Using a two-stage design, all patients were assessed by two measures of quality of life (Diabetes Quality of Life Measure; Medical Outcome Study Health Survey) and a psychiatric symptoms checklist (SCL-90R). Patients scoring 63 or greater on the global severity index of the SCL-90R and 30% below this cutoff were then evaluated using the Structured Clinical Interview for the DSM-III-R (SCID). Quality of life in both Type I and Type II diabetes was influenced by the level of current psychiatric symptoms and presence of co-morbid psychiatric disorder, after controlling for number of diabetic complications (e.g. effect of lifetime psychiatric illness on diabetes-related HRQOL; F = 46.8; df = 3, 135; p < 0.005). These effects were found consistently across specific domains. Both recent and past psychiatric disorders influenced HRQOL. Separate analyses comparing patients with and without depression showed similar effects. No interaction effects between diabetes type, number of complications, and psychiatric status were found in analyses. Finally, increased severity of psychiatric symptoms was correlated with decreased HRQOL in patients without current, recent, or past psychiatric diagnosis. This study shows the consistent, independent contribution of psychiatric symptoms and illness to the HRQOL of patients with a co-existing medical illness. Thus, psychiatric interventions addressing common conditions, such as depression, could improve the HRQOL of patients without changing medical status.