Objectives Diabetes mellitus and mental health can affect the sleep quality of older people. The aim of this study was to examine association of sleep quality with mental health and blood sugar control in elderly people with diabetes. Methods & Materials This cross-sectional study was conducted in 2017 on 200 seniors with type 2 diabetes referred to Shahid Bahonar and Shafa hospitals in Kerman, Iran who were selected using a convenience sampling technique. Data were collected using the Kessler Psychological Distress Scale (K6), Yield questionnaire and Pittsburgh Sleep Quality Index (PSQI) questionnaire. The data were analyzed using chisquare test, Pearson correlation test and multivariate logistic regression analysis. Results The mean age of participants was 69. 33± 9. 65 years. Most of them were female (n=98, 55. 4%). Their overall sleep quality was poor (6. 9± 4. 5). More than half of them had moderate level of mental distress (54. 8%) and psychological wellbeing (46. 3%) and poor blood sugar control (65. 5%). Mental health and blood sugar control had a significant effect on the sleep quality of elderly people with diabetes (P<0. 05). Conclusion Sleep disorders is more common in elderly people with diabetes which can be affected by their mental health and blood sugar control. Health care providers should pay more attention to the sleep quality of these patients, and provide appropriate educational intervention. Since the variables of psychological distress, psychological well-being and blood sugar control explained 19% of sleep disorders, further studies are needed to identify other factors affecting their sleep disorders