The aim of this study was to assess the rates of depression, anxiety, and stress and quality of sleeping among COVID-19 patients with and without type 2 diabetes mellitus (T2DM). A case and control design has been employed, involving patients affected by COVID-19 infection (884 with T2DM vs. 884 controls without T2DM) and hospitalized in Istanbul (Turkey) from January to December 2021. A multivariate stepwise regression approach was used to test the associations between sociodemographic, metabolic, serum markers, mental health scores, and T2DM/COVID-19 patients’ clinical presentation. A statistically significant difference between T2DM and non-T2DM was found with respect to age, gender, BMI (body mass index), smoking, physical exercise, and physical comorbidities as well as levels of depression, anxiety, stress, and sleeping disorders (0.0003 ≤ all p = 0.025). With regard to serum biomarkers, vitamin D and ferritin were identified as useful parameters of reduction of glycated hemoglobin as well as COVID-19 infection among T2DM patients. This study detected that 25% of patients with COVID-19 and T2DM experienced mental distress, with sleeping disturbances and lifestyle changes markedly impacting their clinical outcome alongside metabolic and serum parameters.