Background This study prospectively examined the relationship between preinjury, injury‐related, and postinjury factors and posttraumatic stress disorder (PTSD) following moderate to severe traumatic brain injury (TBI). Method Two hundred and three participants were recruited during inpatient admission following moderate to severe TBI. Participants completed an initial assessment soon after injury and were reassessed at 3, 6, and 12 months, 2, 3, 4, and 5 years postinjury. The Structured Clinical Interview for the Diagnostic and Statistical Manual of Mental Disorders–fourth edition was used to diagnose pre‐ and postinjury PTSD and other psychiatric disorders. The Glasgow Outcome Scale‐Extended (GOSE) and the Quality of Life Inventory (QOLI) were used to evaluate functional and psychosocial outcome from 6 months postinjury. Results The frequency of PTSD ranged between 0.5 and 9.4% during the 5‐year period, increasing throughout the first 12 months and declining thereafter. After controlling for other predictors, shorter posttraumatic amnesia duration (odds ratio = 0.96, 95% CI = 0.92–1.00), other concurrent psychiatric disorder (odds ratio = 14.22, 95% CI = 2.68–75.38), and lower GOSE (odds ratio = 0.38, 95% CI = 0.20–0.72) and QOLI scores (odds ratio = 0.97, 95% CI = 0.95–0.97) were associated with greater odds of having injury‐related PTSD. Discussion The results of this study indicate that while shorter posttraumatic amnesia duration is associated with PTSD, greater TBI severity does not prevent PTSD from evolving. Patients with PTSD experienced high rates of psychiatric comorbidity and poorer functional and quality of life outcomes after TBI. Conclusion There is a need to direct clinical attention to early identification and treatment of PTSD following TBI to improve outcomes.