This study examines baseline levels and correlates of diabetes-related emotional distress among inner-city African Americans and Hispanics with type 2 diabetes. The Problem Areas in Diabetes (PAID) scale, which measures diabetes-related emotional distress, was administered to 180 African American and Hispanic adults participating in the REACH Detroit Partnership. We examined bivariate and multivariate associations between emotional distress and biological, psychosocial, and quality of health care variables for African Americans and Hispanics. Scores were significantly higher among Hispanics than African Americans. Demographic factors were stronger predictors of emotional distress for Hispanics than for African Americans. Daily hassles, physician support, and perceived seriousness and understanding of diabetes were significant for African Americans. Understanding the personal, family and community context of living with diabetes and conducting interventions that provide support and coping strategies for self-management have important implications for reducing health disparities among disadvantaged racial and ethnic groups.