Diabetes is fundamentally a chronic metabolic disorder, yet it has established psychological connections and consequences. The present article offers an overview of some of the established findings with respect to the psychological aspects of diabetes among adults and adolescents. This narrative review describes the psychological impact of diabetes and the manner in which psychological functioning of the individual affects the development, management, and outcome of diabetes. Diabetes can lead to a great deal of distress, common mental health problems such as anxiety, depression, and sleep disorders, and can increase the risk of suicide. It also affects cognitive functioning across multiple domains such as attention, concentration, memory, executive function, and information processing speed. Diabetes is a burdensome life condition that significantly reduces quality of life. Personality characteristics can have both positive and negative impacts on self-management of diabetes, and some personality profiles, especially the distressed/Type D personality, are indicative of poor prognosis and greater chances of developing medical complications. Psychological interventions such as cognitive behaviour therapy, acceptance and commitment therapy, behavioural activation, and counselling strategies such as educational programmes, problem solving training, and motivational interviewing have proven very effective in coping with diabetes distress, managing comorbid mental health problems, and increasing adherence to self-care and antidiabetic behaviours. Additionally, yogic practices have also shown promising results for self-management of diabetes. Paediatric diabetes especially presents unique psychosocial challenges to patient management and affects academic performance of children and career choices of affected individuals.