BACKGROUND: Evidence increasingly indicates that poor sleep quality is a major public health concern. Household food insecurity (HFI) disproportionately affects Latinos and is a novel risk factor for poor sleep quality. Psychological distress may be a potential mechanism through which HFI affects sleep quality. Sleep, food insecurity, and distress are linked to type 2 diabetes mellitus. OBJECTIVES: We examined the relations between HFI, psychological distress, and sleep quality and tested whether psychological distress mediates the relation between HFI and sleep in people with diabetes mellitus. METHODS: Latinos with type 2 diabetes mellitus (n = 121) who completed baseline assessments for the CALMS-D (Community Health Workers Assisting Latinos Manage Stress and Diabetes) stress management intervention trial completed the US Household Food Security Survey, and measures of depressive symptoms [Personal Health Questionnaire Depression Scale (PHQ-8)], anxiety symptoms [Patient-Reported Outcomes Measurement Information System (PROMIS)-short], diabetes distress [Problem Areas in Diabetes Questionnaire (PAID-5)], and sleep quality [Pittsburgh Sleep Quality Index (PSQI)]. Psychological distress was operationalized with the PHQ-8, PROMIS-short, and PAID-5 scales. We used unadjusted and adjusted indirect effect tests with bias-corrected bootstrapped 95% CIs on 10,000 samples to test both relations between variables and potential mediation. RESULTS: Mean age was 61 y, 74% were women, and 67% were food insecure. Experiencing HFI was associated with both greater psychological distress and worse sleep quality (P < 0.05). Depressive symptoms (adjusted R2: 2.22, 95% CI: 1.27, 3.42), anxiety symptoms (adjusted R2: 1.70, 95% CI: 0.87, 2.85), and diabetes mellitus distress (adjusted R2: 0.60, 95% CI: 0.11, 1.32) each mediated the relation between HFI and worse sleep quality with and without adjustment for age, education, income, marital status, and employment status. CONCLUSIONS: Household food insecurity is a common and potent household stressor that is associated with suboptimal sleep quality through psychological distress. Efforts to improve food security and decrease psychological distress may yield improved sleep in this high-risk population. The CALMS-D stress management trial was registered at clinicaltrials.gov as NCT01578096.