Objective To examine whether perceptions of the impact of cancer are related to health‐related quality of life (HRQoL) and psychological distress among survivors of cancer in adolescence and young adulthood (AYA). Methods One hundred seventy‐three AYA cancer survivors (aged 18‐35 and 15‐29 years at time of diagnosis) completed a mailed survey assessing impact of cancer (IOC‐AYA), HRQoL (SF‐36), and distress (BSI‐18). Hierarchical linear regression models analyzed the independent effects of perceived impacts of cancer on HRQoL and distress after controlling for clinical and sociodemographic characteristics. Multivariate analyses also examined the extent to which positive and negative perceptions attenuated the effects of control variables on HRQoL and distress. Results Being unemployed or not in school, and self‐reported health problems were significantly associated with worse physical HRQoL. Mental HRQoL and psychological distress appeared as a function of reporting both positive and negative impacts of cancer; mental health outcomes were better in AYAs reporting more positive and less negative impact of cancer in their lives. Perceived impact of cancer, in both positive and negative ways, attenuated the effects of sociodemographic and clinical factors on mental HRQoL and psychological distress. Conclusion Results suggest that mental HRQoL and psychological distress, but not physical HRQoL, are a function of survivors' perceptions of how cancer has affected them and continues to affect them in both positive and negative ways. Findings suggest that opportunities for AYA cancer survivors to reframe or better understand the context of cancer in their lives may result in improved mental health outcomes.