Abstract Background Covid-19 causes a wide range of symptoms in patients, ranging from mild manifestations to severe disease and death. This study assessed the health-related quality of life (HRQOL) and associated factors of Covid-19 patients using primary data from confirmed cases in South Central Ethiopia. Methods We employed a facility-based, cross-sectional study design and conducted the study at the Bokoji Hospital Covid-19 treatment centre. A structured questionnaire and the EQ-5D-3L scale were used to collect the data for analysis. The HRQOL results measured by the EQ-5D-3L tool were converted to a health state utility (HSU) using the Zimbabwe tariff. The average health utility index and HSU–visual analogue scale across diverse sociodemographic and clinical characteristics were compared using the Mann–Whitney U test or Kruskal–Wallis test. We employed a multiple linear regression to examine factors associated with HSU values simultaneously. The data were analysed using STATA version 15. Results The overall mean HSU score from the EQ-5D was 0.688 (SD: 0.285), and the median was 0.787 (IQR 0.596, 0.833). The mean HSU from the visual analogue scale score was 0.69 (SD: 0.129), with a median of 0.70 (IQR 0.60, 0.80). Those who received dexamethasone and intranasal oxygen supplement, those with comorbidity, those older than 55 years and those with a hospital stay of more than 15 days had significantly lower HSU scores than their counterparts (p < .001). Conclusion Covid-19 substantially impaired the HRQOL of patients in Ethiopia, especially among elderly patients and those with comorbidity. Therefore, clinical follow-up and psychological treatment should be encouraged for these groups. Moreover, the health utility values from this study can be used to evaluate quality adjusted life years for future cost-effectiveness analyses of prevention and treatment interventions against Covid-19.