ObjectiveThe inverse relationships between chronic disease multimorbidity and health-related quality of life (HRQoL) have been well-documented in the literature. However, the mechanism underlying this relationship remains largely unknown. This is the first study to look into the potential role of functional limitation as a mediator in the relationship between multimorbidity and HRQoL.MethodsThis study utilized three recent waves of nationally representative longitudinal Household, Income, and Labor Dynamics in Australia (HILDA) surveys from 2009 to 2017 (n= 6,814). A panel mediation analysis was performed to assess the role of functional limitation as a mediator in the relationship between multimorbidity and HRQoL. The natural direct effect (NDE), indirect effect (NIE), marginal total effect (MTE), and percentage mediated were used to calculate the levels of the mediation effect.ResultsThis study found that functional limitation is a significant mediator in the relationship between multimorbidity and HRQoL. In the logistic regression analysis, the negative impact of multimorbidity on HRQoL was reduced after functional limitation was included in the regression model. In the panel mediation analysis, our results suggested that functional limitation mediated ~27.2% (p< 0.05) of the link between multimorbidity and the composite SF-36 score for HRQoL. Functional limitation also mediated the relationship between the number of chronic conditions and HRQoL for each of the eight SF-36 dimensions, with a proportion mediated ranging from 18.4 to 28.8% (p< 0.05).ConclusionFunctional status has a significant impact on HRQoL in multimorbid patients. Treatment should concentrate on interventions that improve patients' functioning and mitigate the negative effects of multimorbidity.