Background. Patients with diabetes mellitus are at twice the risk of developing depression than the general population. The coexistence of diabetes and depression largely contributes to increased morbidity and mortality and results in high healthcare cost. Objective. The aim is to assess severity of depression and its determinants in diabetes outpatients at Hawassa University Comprehensive Specialized Referral Hospital, southern Ethiopia. Methods. An institutional-based cross-sectional study was done using a systematic sampling method. To assess the magnitude of depression, the patient health questionnaire-9 scale was used. Then, the data were entered into EpiData version 3.1 and exported to SPSS version 20 software. Binary logistic regression was used to assess the association between dependent variable and independent variables. Results. The magnitudes of depression were found to be 41.5%. The potential predictors were adhering to alcohol intake (adjusted odds ratio, AOR=3.71, 95% CI: 1.52, 9.06), loss of someone very close or spouse (AOR=6.83, 95% CI 3.07, 15.19), having no social support (AOR=3.68, 95% CI: 1.63, 8.29), not adhering to the recommended dietary regimen (AOR=6.83, 95% CI 3.07, 15.19), not adhering to physical activity (AOR=4.1, 95% CI: 1.86,9.014), not adhering to medication (AOR=4.2, 95% CI: 1.7, 10.31), and not having raised blood pressure of 140/90 mmHg and above (AOR=7.42, 95% CI: 3.40, 16.17). Conclusion. Depression was a common comorbidity associated with diabetes occurring in more than four in ten of the participants.