Objective To assess psychological distress and quality of life (QoL) among patients with non-small cell lung cancer (NSCLC) receiving chemotherapy and examine the relationship between distress and QoL across treatment cycles. Methods This prospective observational study enrolled 105 patients with NSCLC undergoing chemotherapy. Psychological distress was assessed using the Depression Anxiety Stress Scale-21 questionnaire, and QoL was evaluated using the WHO Quality of Life-BREF questionnaire at baseline (before chemotherapy) and after three and six cycles of chemotherapy. Linear mixed models with first-order autoregressive covariance were used to account for within-patient correlation. Results Psychological distress worsened over time, with anxiety and stress increasing significantly. QoL declined across all domains, with physical health scores decreasing from 57.99 to 46.71 and psychological health from 54.48 to 43.00. Regression analysis demonstrated an inverse relationship between distress and QoL, with distress explaining 41.74% of QoL variance at baseline and 44.01% at the final assessment. Patients in severe and extremely severe distress categories had a two times higher risk of experiencing a ≥10-point drop in QoL than those with mild or no distress. Conclusion This prospective observational study confirms that patients with NSCLC receiving chemotherapy experience significant psychological distress and impaired QoL. Early identification and intervention are critical for improving patient outcomes, treatment adherence and quality of care. These findings highlight the need for integrated palliative care in NSCLC management.