Background Rheumatoid arthritis (RA) is a chronic autoimmune disorder, which has a significant impact on patients' health-related quality of life (HRQoL), and limits physical function as well as increases pain and fatigue. Therefore, this study aimed to evaluate the HRQoL and functional disability profile of patients with RA in Palestine to determine the socio-demographic and clinical features associated with low HRQoL and functional disability in patients with RA and to investigate the impact of drugs used on functional disability and HRQoL. Methodology A cross-sectional, observational study conducted at rheumatology clinics in Northern West-Bank, Palestine (Alwatani Hospital—Nablus, Khalil Suleiman Hospital—Jenin, Thabet Thatbet Hospital-Tulkarem, and Darweesh Nazzal Hospital—Qalqilia). EuroQoL-5 Dimension scale (EQ-5D-5L) was used to evaluate HRQoL, Health Assessment Questionnaire, Disability Index (HAQ-DI) to evaluate the functional disability, and the Health Assessment Questionnaire pain visual analog scale (HAQ-VAS) to evaluate pain. Results 300 patients were included in the study, 229(76.3%) were females, the mean ± standard deviation age was 49 ± 13.10 years, and the median RA duration (lower–upper quartiles) was 6 (4–12) years. The median EQ-5D-5L index value and Euro QOL visual analogue scale (EQ-VAS) scores were 0.56 and 60, respectively. There was a significant strong positive correlation (R = 0.773; p < 0.001) between the EQ-5D-5L index values and the reported EQ-VAS scores. The median HAQ-DI and HAQ-VAS were 0.94 and 40, respectively. The results of multiple linear regression showed that treatment with biological DMARD (Etanercept), having work, higher income, absence of night pain, and absence of comorbid diseases were significantly associated with higher EQ-5D-5L index score (better HRQoL) and lower HAQ-DI scores (less disability). On the other hand, older age and the presence of morning stiffness were significantly associated with higher HAQ-DI scores (more disability). Conclusions This study revealed the impact of treatment, clinical variables, and socio-demographic factors on disability and HRQoL in RA patients. Healthcare providers should be aware of the association between treatment with biological DMARD and improved HRQoL and functional status to make early interventions that reduce disability and improve HRQoL in susceptible patients.