Lipohypertrophy (LH) at insulin injection sites is a common but preventable complication in type 1 diabetes mellitus (T1DM). We evaluated the prevalence, contributing risk factors, and consequences of LH, specifically the glycemic variability (GV) among T1DM patients. This is a cross-sectional study conducted at a tertiary care center in India, wherein 139 subjects with T1DM were randomly selected and evaluated for the presence of LH through visual and palpation examinations. Demography, anthropometry, and injecting practices were evaluated using a validated questionnaire and their effect on LH was determined. Subsequently, the effect of LH on GV and unexplained hypoglycemia (UH) was studied. Mean glucose, mean amplitude of glycemic excursions (MAGEs), and continuous overlapping net glycemic action (CONGA) were assessed in a subset of patients who injected insulin alternately in LH and non-LH sites. The overall prevalence of LH was 69.8%, and was significantly higher in adults than in children (P = 0.038). Improper rotation of sites (P < 0.0001) and insulin syringe reusage for more than five times (P = 0.009) significantly increase the risk of LH. The presence of LH has a significant effect on GV and UH with adjusted odds ratios of 17.65 (P < 0.0001) and 28.02 (P < 0.0001), respectively. Ambulatory glucose monitoring on a subset of patients confirmed that the mean glucose, MAGE, and CONGA were higher when subjects injected insulin at LH sites than at non-LH sites. Improper rotation of sites and reuse of needles are the leading causes of LH in Indian T1DM patients, which, in turn, significantly increases the risk of GV and UH.