BACKGROUND There is a well-documented association between depression and disability in people with diabetes. However, less is known about the possible association of co-occurring anxiety on these associations. OBJECTIVE The objective of this study was to assess the association of elevated anxiety or depression symptoms or both with functional disability and frequent disability days in a community sample with type 2 diabetes. METHODS The participants were 1999 people with diabetes who completed the baseline portion of the Evaluation of Diabetes Treatment study. Functional disability was assessed using the World Health Organization Disability Assessment Schedule II. Frequent disability days were assessed using a cutoff score ≥14 on a question assessing functional disability in the past month from the Healthy Days Core Module. Depression and anxiety were assessed with the Patient Health Questionnaire and General Anxiety Questionnaire with cutoff scores ≥10 applied to create groups. Additional questions examined diabetes complications, chronic conditions, and sociodemographic characteristics. RESULTS Fully adjusted logistic regression analyses demonstrated an increased likelihood of reporting functional disability for all groups with high anxiety or depressive symptoms or both. Groups with high depressive symptoms with and without high anxiety symptoms were also more likely to report frequent disability days. CONCLUSIONS Results indicate that elevated anxiety and depression symptoms are important factors associated with increased functional disability and frequent disability days in people with diabetes.