Background: To describe changes in health-related quality of life (HRQoL) of postmenopausal women with osteoporosis treated with teriparatide for up to 18 months and followed-up for a further 18 months, and to assess the influence of recent prior and incident fractures. Methods: The European Forsteo Observational Study (EFOS) is an observational, prospective, multinational study measuring HRQoL using the EQ-5D. The primary objective was to assess changes in HRQoL during 36 months in the whole study population. A secondary post-hoc analysis examined fracture impact on HRQoL in four subgroups classified based on recent prior fracture 12 months before baseline and incident clinical fractures during the study. Changes from baseline were analysed using a repeated measures model. Results: Of the 1581 patients, 48.4% had a recent prior fracture and 15.6% of these patients had an incident fracture during follow-up. 10.9% of the 816 patients with no recent prior fracture had an incident fracture. Baseline mean EQ-VAS scores were similar across the subgroups. In the total study cohort (n = 1581), HRQoL (EQ-VAS and EQ-5D index scores) improved significantly from baseline to 18 months and this improvement was maintained over the 18-month post-teriparatide period. Improvements were seen across all five EQ-5D domains during teriparatide treatment that were maintained after teriparatide was discontinued. Subjects with incident clinical fractures had significantly less improvement in EQ-VAS than those without incident fractures. Recent prior fracture did not influence the change in EQ-VAS during treatment. Conclusions: EFOS is the first longitudinal study in women with severe postmenopausal osteoporosis in the real world setting to show a substantial improvement in HRQoL during teriparatide treatment that was sustained during subsequent treatment with other medications. The increase in HRQoL was lower in the subgroups with incident fracture but was not influenced by recent prior fracture. The results should be interpreted in the context of the design of an observational study.