Purpose: To analyze the impact of hyperglycemia on the clinical outcome of COVID-19 in patients with newly diagnosed diabetes (NDD). Patients and Methods: We performed a retrospective study of 3114 cases of COVID-19 without pre-existing diabetes, 351 of which had NDD, in Hubei Province, China. The Cox regression model was used to calculate the risk of adverse clinical outcomes comparing the NDD vs non-NDD group before and after propensity score-matched (PSM) analysis. Patients with NDD were further divided into a sustained hyperglycemia group, a fluctuating group, and a remitted group based on their blood glucose levels during hospitalization as well as into hypoglycemic agent users and nonusers. Results: Compared to the non-NDD individuals, individuals with NDD had a significantly increased risk of all-cause mortality (adjusted HR after PSM, 2.65; 95% CI, 1.49-4.72; P = 0.001) and secondary outcomes involving organ damage during the 28-day follow-up period. Subgroup analyses indicated that among individuals with NDD, the individuals with remitted hyperglycemia had the lowest 28-day mortality, whereas those with sustained hyperglycemia had the highest (IRR 24.27; 95% CI, 3.21-183.36; P < 0.001). Moreover, individuals treated with hypoglycemic agents had significantly lower all-cause mortality than those not treated with hypoglycemic agents (IRR 0.08; 95% CI, 0.01-0.56; P < 0.001). Conclusion: Our study reinforces the clinical message that NDD is strongly associated with poor outcomes in COVID-19 patients. Furthermore, resolved hyperglycemia in the later phase of the disease and the use of hypoglycemic agents were associated with improved prognosis in patients with NDD.