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Objective: The aim of this study was to determine the effect of a broad range of common mental disorders and their comorbidity on health-related quality of life and functional disability. Methods: In all, 2734 Australians aged ≥18 years, recruited from the general community via Facebook during August–December 2014, completed an online survey assessing demographic characteristics, nine mental disorders, suicidal ideation and attempt. Outcome measures were health-related quality of life (assessed using the Assessment of Quality of Life (AQoL)-4D measure and functional disability (days out of role). Results: Overall, 53.1% of the sample met criteria for at least one mental disorder. Participants with each of the 11 mental health problems had significantly lower mean AQoL-4D scores and significantly greater functional disability compared with not having the disorder (P < 0.001). A monotonic decrease in quality of life and an increase in functional disability were observed with an increased total number of comorbid disorders (P < 0.001). Accounting for disorder prevalence, annual economic burden for each mental disorder was estimated to be in the range of A$870 million–A$17 billion. Conclusions: Mental disorders negatively affect health-related quality of life and functional disability, exacerbated by increased comorbidity. The economic burden to participants and employers estimated in this study is of concern, and highlights the importance of evidence-based treatment and prevention approaches. What is known about the topic?: Mental disorders are associated with poorer health-related quality of life, increased functional disability and increased economic costs. What does this paper add?: This paper furthers our understanding of the associations of nine mental disorders, suicidal ideation and suicide attempts with quality of life in an Australian setting, highlighting the considerable economic implications of these associations. Further, it reveals that comorbidity of mental disorders exacerbates reductions in quality of life and increased functional disability. What are the implications for practitioners?: The economic burden associated with lost productivity and quality of life for individuals with mental disorders is considerable. Therefore, prioritising funding to prevention and treatment using evidence-based approaches will have significant effect in terms of economic productivity and personal well-being for individuals. [ABSTRACT FROM AUTHOR]