Conducted during the second wave of the pandemic, this cross-sectional study examined the link between sleep quality, physical activity, exposure, and the impact of COVID-19 as predictors of mental health in Saudi undergraduate students. A convenience sample of 207 participants were recruited, 89% of whom were females and 94% were single. The measures included questionnaires on the level of exposure and the perceived impact of COVID-19, a physical activity measure, GAD-7, PHQ-9, and PSQI. The results indicated that approximately 43% of participants exhibited moderate anxiety, and 50% were at risk of depression. Overall, 63.93% of students exposed to strict quarantine for at least 14 days (n = 39) exhibited a high risk of developing depression (χ²(1) = 6.49, p < 0.05, ϕ = 0.18). A higher risk of depression was also found in students whose loved ones lost their jobs (χ²(1) = 4.24, p < 0.05, ϕ = 0.14). Moreover, there was also a strong association between depression and anxiety (β = 0.33, p < 0.01), sleep quality (β = 0.32, p < 0.01), and the perceived negative impact of COVID-19 on socio-economic status (β = 0.26, p < 0.05), explaining 66.67% of depression variance. Our study highlights the socio-economic impact of this pandemic and the overwhelming prevalence of depression.