Insomnia is a common sleep complaint in Canada and is associated with increased use of health care services and economic burden. This paper examines the association of insomnia with functional outcomes relevant to daily behaviors and sleep-related quality of life among First Nations participants using the Functional Outcomes of Sleep Questionnaire (FOSQ-10). The First Nations Sleep Health Project follow-up survey was conducted in partnership with two Cree First Nations in the summer of 2022, where 355 individuals participated. Statistical analysis was conducted using logistic regression models. The mean age of the participants was 40.76 ± 14.60 (SD) years, and 59.4% were females. The prevalence of chronic insomnia (Insomnia Severity Index score of ≥15) was 21.0%, with more females (26.1%) than males (13.8%) experiencing it among the 348 participants. Overall, the mean FOSQ-10 score was 17.27 ± 2.98 among the 350 participants, with those who had clinical insomnia reporting significantly lower scores than those without clinical insomnia (mean ± SD: 14.6 ± 3.9 vs. 18.0 ± 2.1; p < 0.001). The FOSQ-10 scores indicated sleep-related functional impairment (FOSQ-10 total score < 17.90) in 46.6% of participants. After adjusting for age, excessive daytime sleepiness, sex, and regular use of prescription medication, we found that clinical insomnia was significantly associated with functional impairments. In fact, a person with clinical insomnia was 3.5 times more likely to have functional impairments than those without clinical insomnia. This study highlights the significant association between insomnia and functional impairments related to daily behaviors and quality of life in two First Nation communities. Identifying this association can help healthcare providers to diagnose and treat patients with insomnia in these communities.