Background: Previous findings on using Glucagon-like peptide-1 receptor agonist (GLP1-RA) as an antidepressant were conflicting, lacking large-scale studies. We used population-based data to investigate depression and anxiety risk in diabetic patients receiving the medication. Methods: From claims records of the National Health Insurance Research Database (NHIRD) of Taiwan, we identified cohorts of 10,690 GLP1-RA users and 42,766 propensity score-matched patients without GLP1-RA use from patients with diabetes mellitus (DM) diagnosed in 2011–2017, matched by age, gender, index year, occupation, urbanization, comorbidities, and medications. Incidence, hazard ratios (HR) and 95% confidence interval (CI) of depression and/or anxiety were estimated by the end of 2017. Results: The overall combined incidence of anxiety and/or depression was lower in GLP1-RA users than in non-users (6.80 versus 9.36 per 1,000 person-years), with an adjusted HR adjusted hazard ratio (aHR) of 0.8 (95% CI: 0.67–0.95) after controlling for covariates. The absolute incidence reduction was greater in anxiety (2.13 per 1,000 person-years) than in depression (0.41 per 1,000 person-years). The treatment effectiveness was significant for women. Patients taking GLP1-RA for longer than 180 days had the incidence of anxiety reduced to 2.93 per 1,000 person-years, with an aHR of 0.41 (95%CI: 0.27–0.61), compared to non-users. Dulaglutide could significantly decrease risks of both anxiety and depression. Conclusion: Patients with DM receiving GLP1-RA therapy have a greater reduction of the risk of anxiety than that of depression. Our findings strengthen previous research that advocated possible anti-depressant or anxiolytic effects of GLP1-RA and may lead to improved treatment adherence among patients with DM.