There has been much research on Major Depressive Disorder (MDD) in terms of functional impairment associated with the disorder. On the other hand, Dysthymic Disorder (DD) has not received much attention in the literature in relation to the functional disability associated with the disorder. Similarly, the moderator effect of religiosity has been studied in many physical and mental health disorders, but has not been explored in DD. The aims of the present study were to explore the association between DD and functional disability, and to study the moderator effect of religiosity on the association. The data for the study was obtained from consortium of Psychiatric Epidemiologic Survey (CPES). The survey collected data on prevalence of mental health problems and the sociocultural determinants, in the national population. The present study utilized the data on DD and factors such as race, gender, marital status, employment status, and religiosity, in order to explore association between DD and disability and the effect of religiosity on the association. Results show that the subjects who have endorsed DD are 1.092 times more likely to have functional disability than those who have not endorsed DD. The association is statistically significant with the 95% CI for the Odds Ratio (OR) as 1.072–1.113. The religiosity has not shown a significant effect on the association between DD and functional disability. In conclusion there is statistically significant association between DD and the functional disability. Although the cross-sectional study design makes it difficult to determine the causal relationship, the results may signify that DD could potentially cause significant functional impairment. Further longitudinal studies are needed to probe the association between DD and disability.