The present study investigated identity formation in adolescents and emerging adults with type 1 diabetes and its relation to psychological and diabetes-specific functioning. As diabetes management is especially challenging in these life periods, identity problems may not only hamper psychological adjustment, but could also impact diabetes management. A total of 431 patients were 1:1 matched with control participants, based on age, gender, and context (student, employed, other). To investigate identity types or statuses, cluster analysis on different identity processes was conducted, resulting in six statuses. Patients in foreclosure and achievement (both characterized by strong identity commitments) presented with the most adaptive functioning. Patients in troubled diffusion and moratorium (both characterized by a maladaptive type of exploration) showed the least adaptive scores on well-being, diabetes-specific problems, treatment adherence, and illness-perceptions. The present study underscores the importance of assessing identity issues in youth with type 1 diabetes.