Introduction Gestational diabetes mellitus (GDM) complicates ∼16% of pregnancies in Australia and has significant implications for health of both mother and baby. Antenatal anxiety and depression are also associated with adverse pregnancy outcomes. The interaction between GDM and mental health in pregnancy is poorly understood. With the aim of exploring the nuanced interaction between GDM and mental health further, we investigated whether GDM treatment modality (diet versus insulin) influenced psychological wellbeing in women with GDM. Methods Psychological wellbeing was assessed in women with GDM treated with diet (GDM-Diet, n = 20) or insulin (GDM-Insulin, n = 15) and pregnant women without GDM (non-GDM, n = 20) using questionnaires [Edinburgh Depression Scale (EDS), State-Trait Anxiety Inventory (STAI-6), and in women with GDM, Problem Areas in Diabetes (PAID)] at 24–34 weeks gestation and again at ∼36 weeks gestation. Results Women in the GDM-insulin group had significantly higher levels of anxiety than the non-GDM group at both time points. Women in the GDM-Diet group had higher levels of anxiety at 24–34 weeks gestation than the non-GDM group but did not differ at ∼36 weeks gestation. Although depression scores tended to be higher in GDM-Insulin and GDM-Diet groups than in the non-GDM group at both time points, this was not statistically significant. Diabetes-related distress was similar in the GDM-Diet and GDM-Insulin groups at both time points and did not change during pregnancy. A high proportion of the GDM-Insulin group had past/current mental illness (60%). Conclusions In this pilot study GDM was associated with differences in psychological wellbeing, specifically increased anxiety in women treated with insulin. Specialised interventions to support women with GDM should be considered, especially those requiring insulin. Trial registration: Not applicable as this was a purely observational study.