Abstract Background Type 2 diabetes mellitus (T2DM) is a common chronic disease that disproportionally affects disadvantaged groups. People with a low socioeconomic position (SEP) have increased risk of T2DM and people with a low SEP and T2DM have higher HbA_1c-levels compared to people with T2DM and high SEP. The aim of this study is to analyze longitudinal socioeconomic differences in health-related functioning in people with T2DM. Methods Longitudinal data from 1,537 participants of The Maastricht Study with T2DM were used (32.6% female, mean (SD) age 62.9 (7.7) years). SEP was determined by baseline measures of education, occupation and income. Health-related functioning (physical, mental and social) was measured with the Short-Form Health Survey and the Impact on Participation and Autonomy survey (all scored from 0 to 100). Associations of SEP and health-related functioning were studied annually over a 10-year period (median (IQR) 7.0 (5.0) years, baseline 2010–2018) using linear mixed methods adjusting for demographics, HbA_1c-levels and lifestyle factors. Results Participants with a low SEP had significantly worse health-related functioning compared to those with a high SEP. For example, participants with low income had lower scores for physical (-4.49[CI -5.77;-3.21]), mental (-2.61[-3.78,-1.44]) and social functioning (-9.76[-12.30;-7.23]) compared to participants with high income on a scale from 0 to 100. In addition, participants with a low education significantly declined more over time in mental (score for interaction education with time − 0.23[-0.37;-0.09]) and social functioning (-0.44[-0.77;-0.11]) compared to participants with high education. Participants with low and intermediate incomes significantly declined more over time in physical functioning (-0.17 [-0.34, -0.01 and − 0.18 [-0.36, 0.00]) compared to participants with high income. Conclusions Among people with T2DM, those with a lower SEP had worse health-related functioning in general than people with a higher SEP. Additionally, people with T2DM and low education developed poorer mental and social functioning over time compared to people with T2DM and high education. People with T2DM and low or intermediate income declined more in physical functioning over time than those with high incomes. In addition to HbA_1c-levels and lifestyle patterns, more attention is needed for socioeconomic differences in health-related functioning for people living with T2DM.