Objective: Diabetes is a chronic health condition that requires daily self-management activities to prevent or delay the onset of serious long-term complications. The two main types of diabetes are Type 1 (T1D) and Type 2 diabetes (T2D). Although both differ in their etiology, they share similar challenges of self-management of blood glucose levels, which, if are persistently high over time can lead to serious long-term complications. Sexual dysfunction (SD) is a common complication of both types of diabetes and affects both men and women. Although the physical aspects of SD are established, less is known about the emotional factors that may also impact SD in adults with diabetes. This study explored the emotional well-being factors associated with SD among 3,338 men and women with T1D and T2D. Methods: The relationships between self-reported SD and depressive and anxiety symptoms, and diabetes-specific distress, were examined using logistic regression modelling. Results: SD was associated with depressive symptoms (all sub-groups), anxiety (men/T2D; women/T1D/T2D), and diabetes-specific distress (women/T1D/T2D). Diabetes-specific distress was significantly higher in those with T2D who believed their SD was caused by their diabetes. Conclusions: SD impacts both men and women with T1D/T2D and is associated with emotional distress. Evaluation of SD and emotional problems should form part of routine clinical assessment.