Abstract:The stigma associated with mental illness can potentially be a reason for lower quality of life among persons with mental illness. Since self stigma can also exist without actual stigma from the public, more hidden and inside, it seems to be the worst form of stigma against people with mental illness and can directly affect the overall well being of people with mental illness. Moreover, it is also a great barrier for social interaction. However, no study is available on impact of self stigma on quality of life of people with mental illness in South Ethiopia generally and particularly in Dilla town. The purpose of this study was to assess the impact of self stigma on quality of life of people with mental illness at Dilla University Referral Hospital, south Ethiopia. The study was conducted in the psychiatry outpatient department of Dilla University referral hospital. An institutional based cross-sectional study was conducted on 317 people with mental illness that attended psychiatric clinic for mental health service from June 1 st to 30 th , 2016. Data were collected using a pre tested interviewer administered structured questionnaires. Self-stigma was measured using Internalized Stigma of Mental Illness (ISMI) Scale which was validated and used in many other similar settings. Quality of life was measured using quality of life assessment tool Short Form, Version-2 (SF-36). In this study, the prevalence of self stigma among people with mental illness was 32.1%. Regarding Quality of life (QoL) of people with mental illness, 54.6% were experiencing lower quality of life. As self stigma increases by one unit in studied participants, quality of life decreases by 4.1% (OR=0.041; 95% C.I: -0.065,-0.012). In other words, self stigma and QOL were inversely correlated(r=-0.076) which indicates that stigma worsen QoL of people with mental illness. The result of this study was revealed that, apparently high prevalence of self-stigma among persons with mental illness and lower quality of life. To improve QoL of people with mental illness, tackling stigma need to be addressed by health professionals, community, researchers, policy makers and stakeholders.