Background: Diabetes mellitus, which has a wide range of effects on the physical, social and psychological aspects of the well-being of a person, is a common and challenging chronic disease that causes a significant rate of morbidity and mortality. However, studies in our country, by and large, focused on the impact of the disease in terms of mortality and morbidity alone. Therefore, the objective of this study was to assess the health-related quality of life (HRQOL) and associated factors of diabetic patients at the University of Gondar referral hospital, Ethiopia. Methods: A facility-based cross-sectional study was conducted at the University of Gondar referral hospital from April to May 2017. A generic World Health Organization Quality of Life (WHOQOL-BREF) questionnaire was used to measure the HRQOL. The data were analyzed by Stata version 12. Multiple Linear Regression analysis with P-value 0.05 was used to measure the degree of association between HRQOL and independent variables. Results: A total of 408 patients with Diabetes Mellitus were included in the study. The HRQOL scores for physical, psychological, social and environmental domains were 50.9, 54.5, 55.8 and 47.3, respectively. Diabetes-related complications had a significant association with all except the psychological domain. Higher HRQOL was associated with exercising, following the recommended diet, foot care, sensible drinking and the absence of co-morbidities. However, old age, unemployment and being single and widower had a significant association with lower HRQOL. Conclusion: The environmental and physical domains of HRQOL scores were the lowest compared to the social and psychological domains. Old age and living in rural area had a significant association with a lower HRQOL, whereas the absence of diabetes-related complications, exercising, general diet and foot care had a significant association with better HRQOL of patients. Therefore, strong advice on the recommended lifestyle is important, and old patients and rural dwellers should get due attention. In addition, the prevention of diabetes-related complications is important to improve the patient HRQOL which is an important outcome measurement from the patient's perspective related to the impact of the disease. Therefore, including HRQOL assessment as part of routine management is necessary.