Objective: To investigate the association of meibomian gland dysfunction (MGD) and ocular surface exposure with tear film instability in untreated thyroid eye disease (TED) patients. Methods: A cross-sectional study of TED patients from September 2020 to September 2022 was conducted. Ocular surface parameters included ocular surface disease index (OSDI), tear meniscus height (TMH), non-invasive tear break-up time (NITBUT), partial blinking rate, lipid layer thickness (LLT), meibomian gland dropout (meiboscore), Schirmer’s test, and corneal punctate epithelial erosions (PEE). Ocular surface exposure was assessed by the margin reflex distances of the upper and lower eyelid (MRD1 and MRD2), the amount of exophthalmos, lateral flare, and lagophthalmos. Results: In total, 152 eyes from 76 TED patients (64 females and 12 males, age 42.99 ± 12.28 years) and 93 eyes from 61 healthy controls (51 females and 10 males, age 43.52 ± 17.93 years) were examined. Compared with control eyes, TED eyes had higher OSDI, TMH, LLT, and PEE; shorter NITBUT; and worse meiboscore (allp< 0.05). They also had larger amounts of exophthalmos, longer MRD1, more lateral flare, and lagophthalmos. Multivariate analysis identified an association of the tear film instability with lagophthalmos (β = −1.13, 95%CI: −2.08, −0.18) and severe MGD in the lower eyelid (β = −5.01, 95%CI = −7.59, −2.43). Conclusions: Dry eye in TED is mainly manifested as evaporative dry eye disease. Severe lower eyelid MGD and worse lagophthalmos were significantly associated with tear film instability in treatment-naive TED patients.