Background Qualitative strategies can uncover the relationship between the external realities of people living with type 2 diabetes (T2D) and the barriers that are associated with disease self-management. Information from in-depth interviews (IDI) and focus group discussions (FGD) can be used to devise psychological models that could potentially facilitate behaviour changes in people with T2D. We aim to identify salient factors that govern the external realities of people with T2D in relation to disease management. Methods A qualitative study was conducted at a regional primary care clinic in Malaysia using a Grounded Theory Approach. People with T2D were recruited through purposeful sampling to determine their living experiences with the disease. A total of 34 IDIs with 24 people with T2D and 10 health care professionals, followed by two FGDs with people with T2D, were conducted. Results Three major processes that arbitrate self-management practices include– 1) external reality, 2) internal reality, 3) mediators of behaviour. Within the context of external reality, three important sub-themes were identified—intrinsic background status, personal experience, and worldview. Lifestyle habits of persons with T2D play a central role in their disease management. Another common recurring concern is the issue of a low-quality food environment in the country. More importantly, individuals with T2D have a high degree of expectations for a more person-centered approach to their illness. Conclusions We identified modifiable and non-modifiable behavioural factors that influence the daily living environment of people with T2D. This information can be used to customize the management of T2D through targeted behavioural interventions.