Diabetes mellitus is a lifelong metabolic disorder that impacts people's well-being and biopsychosocial status. Psychiatric problems and diabetes mellitus have a complex, reciprocal interaction in which one condition affects the other. In this narrative review, we provide an overview of the literature on the psychological effects of diabetes, expound on the evaluation of emotional disorders in the setting of diabetes, and suggest interventions aimed at enhancing both mental and physical health. Diabetes can make daily life complicated and stressful. Frequent blood glucose testing, taking medications on a regular basis, adhering to a tight diet plan, and exercising are some examples of the suggested daily routine of subjects with diabetes. Furthermore, comorbid diseases and typical diabetic complications can have a detrimental impact on quality of life. When mental health conditions coexist with diabetes mellitus, there is a greater likelihood of medication noncompliance, a decreased commitment to diabetes-related self-care, increased functional impairment, inadequate glycemic control, a higher risk of complications, and overall higher healthcare expenses. Thus, evaluation of the mental health status of patients with diabetes is crucial. When treating psychological issues and psychiatric disorders, a comprehensive biopsychosocial approach should be taken, and where appropriate, psychopharmacological therapies or psychotherapy should be applied. The goal of continuous education and assistance for self-care is to give individuals with the disease the information and abilities they need to control their condition over time.