Background: Adults with type 2 diabetes are at a greater probability of suffering from mental health issues, which could result in a substantial effect on their HRQoL (health-related quality of life). Thus, the focus of this research was to investigate the relationship between comorbid anxiety, depression, and HRQoL among individuals with type 2 diabetes. Methods: Data from the Medical Expenditure Panel Survey from 2016 to 2021 were used to identify adult patients with type 2 diabetes diagnoses for this research. The MEPS used the SF-12 to measure HRQoL. The study employed multivariable linear regression to analyze the association between anxiety, depression, and HRQoL in individuals with type 2 diabetes, taking into consideration several confounding variables such as age, gender, and comorbidities. Results: This study included 5259 individuals with type 2 diabetes, of which the mean age was 52.9 years, 50.7% were men, and 49.3% were women. The findings from this sample show a negative relationship between anxiety, depression, and type 2 diabetic patients' HRQoL. It shows that after adjusting for other factors, diabetes patients with depression (MCS: = -6.817), anxiety (MCS: = -4.957), and both (MCS: = -0.344) have a significantly poorer HRQoL than those without these mental health comorbidities (p-value < 0.001). It also demonstrated the adverse effects on HRQoL of having coexisting chronic illnesses like heart disease, hypertension, and other chronic illnesses, along with a low socioeconomic status. Additionally, it revealed the benefits of employment, education, and regular exercise for HRQoL. Conclusions: The study's findings highlight the links between anxiety, depression, and type 2 diabetes patients' poor HRQoL. It also showed the adverse effects of coexisting chronic diseases and low socioeconomic status on HRQoL and the benefit of work and exercise on HRQoL. These findings can help policymakers to reform healthcare and enforce the early detection and treatment of anxiety and depression to enhance the HRQoL of type 2 diabetic patients.