Background: Coronavirus disease (COVID-19) is correlated with a variety of long-term sequelae that affect different aspects of health, including physical function. This study investigated the longitudinal changes in handgrip strength (HGS) over six months post-hospital discharge in COVID-19 patients and explores the associations between HGS, health-related quality of life, dyspnoea, exercise capacity, and body mass index (BMI). Methods: Adult COVID-19 patients were followed up at one, three, and six months after hospital discharge. HGS, BMI, exercise capacity, and health-related quality of life were assessed. Data from patients with HGS measurements at all three time points were analysed. Results: Low HGS was prevalent one month post-discharge (35%). Participants with low HGS exhibited more severe disease (30.5% vs. 5.9% were admitted to the intensive care unit, p < 0.01), longer hospital stays (median [IQR] 21 [10.0;40.5] vs. 12.0 [8.0; 20.0] days, p < 0.01), greater weight loss (−5.7 [−9.1; −0.6] vs. −3.2 [−5.7; −0.0] kg, p = 0.004), and reduced exercise capacity (6 min walking test [6 MWT], 95.7 [84.0;102.0] vs. 100.0 [92.9; 105.0]% predicted, p = 0.007). Those with persistently low HGS (40% of the initial low HGS group) had worse exercise capacity (6-MWT 93.3 [78.3; 101.0] vs. 101.0 [95.0; 107.0]% predicted, p < 0.001), more dyspnoea (29.0% vs. 2.0% of participants, p < 0.001), poorer quality of life (visual analogue scale score, 75 [50; 75] vs. 85 [75; 95], p < 0.001), and higher rates of problems in various health dimensions. HGS at 1 month was the only significant predictor of HGS improvement from 1 month to 6 months (odds ratio [95% CI] 1.11 [1.03; 1.20], p = 0.008). Conclusions: This study highlights the prevalence of reduced physical function among COVID-19 survivors and emphasises the importance of early identification and intervention to optimise their long-term health. Monitoring HGS, a simple and reliable tool, can provide valuable insights into patients’ overall physical function, aiding in tailored care and improved outcomes.