Background/Objectives: Type 2 diabetes mellitus (DM2) and hypothyroidism are two of the most common endocrine disorders in clinical practice. Hospital length of stay (LOS) is a quality metric of the health systems. We evaluated the association between elevated thyroid-stimulating hormone (TSH) levels and prolonged LOS among all adult patients (age ≥ 18 years) with DM admitted to our Internal Medicine departments between 2014 and 2022. Methods: Data on patient characteristics, LOS, and in-hospital mortality were collected. A TSH level > 4.7 μIU/mL was considered as being elevated. A LOS > 75th percentile and in-hospital mortality were defined as being prolonged. Univariate and multivariable analyses were applied, and propensity score matching controlled for differences between patients with normal and those with elevated TSH levels. Results: Of the 19,066 study participants (median age 75.6 years, IQR 75.9–83.3), 1524 (7.9%) had elevated TSH levels, and prolonged LOS was significantly more common among them (before matching: 38.6% vs. 29.1%, p < 0.001; after matching: 38.7% vs. 32.6%, p = 0.001). After adjustment for potential confounders, elevated TSH levels were also associated with prolonged LOS (OR = 1.22, 95% CI 1.07–1.39, p = 0.002). Conclusions: Elevated TSH levels in diabetic patients hospitalized in Internal Medicine departments are associated with prolonged LOS, emphasizing the importance of identifying hypothyroidism among them.