Anxiety not only concerns mental wellbeing but also negatively impacts other areas of health. Yet, there is limited research on (a) the genetic and environmental aetiology of such relationships; (b) sex differences in aetiology and (c) non-European samples. In this study, we investigated the genetic and environmental variation and covariation of anxiety symptoms and eight components of health-related quality of life (QoL), as measured by the short form health survey (SF-36), using genetic twin model fitting analysis. Data was drawn from the Colombo Twin and Singleton Study (COTASS), a population-based sample in Sri Lanka with data on twins (N = 2921) and singletons (N = 1027). Individual differences in anxiety and QoL traits showed more shared environmental (family) effects in women. Men did not show familial effects. Anxiety negatively correlated with all eight components of QoL, mostly driven by overlapping unique (individual-specific) environmental effects in both sexes and overlapping shared environmental effects in women. This is the first study in a South Asian population supporting the association between poor mental health and reduced QoL, highlighting the value of integrated healthcare services. Associations were largely environmental, on both individual and family levels, which could be informative for therapy and intervention.