Living arrangements are often assumed to be associated with health-related quality of life (HRQoL) among older adults. This study aimed to explore how living arrangements affect HRQoL. A cross-sectional survey was conducted to examine the relationships between HRQoL, activities of daily living (ADLs), depression, and living arrangements among older adults. A total of 220 community dwelling older adults and 231 nursing home residents completed the questionnaires. The path analysis indicated that the older adults' living arrangement did not directly influence their HRQoL, but it had indirect effects through ADLs and depression. The whole model explained 55% of the variance of HRQoL, which suggests that living in nursing homes does not directly cause older adults' poor HRQoL, but poor ADLs and more severe depression among nursing home residents lead to poor HRQoL. To improve their HRQoL, additional focus should be placed on maintaining ADLs and increasing community participation.