Testosterone (T) deficiency, sexual dysfunction, obesity and obstructive sleep apnea (OSA) are common and often coexist. T prescriptions have increased worldwide during the last decade, including to those with undiagnosed or untreated OSA. The effect of T administration on sexual function, neurocognitive performance and quality of life in these men is poorly defined. The aim of this study was to examine the impact of T administration on sexual function, quality of life and neurocognitive performance in obese men with OSA. We also secondarily examined whether baseline T might modify the effects of T treatment by dichotomizing on baseline T levels pre-specified at 8, 11 and 13 nmol/L. This was a randomized placebo-controlled study in which 67 obese men with OSA (mean age 49 ± 1.3 years) were randomized to receive intramuscular injections of either 1000 mg T undecanoate or placebo at baseline, week 6 and week 12. All participants were concurrently enrolled in a weight loss program. General and sleep-related quality of life, neurocognitive performance and subjective sexual function were assessed before and 6, 12 and 18 weeks after therapy. T compared to placebo increased sexual desire (p = 0.004) in all men, irrespective of baseline T levels. There were no differences in erectile function, frequency of sexual attempts, orgasmic ability, general or sleep-related quality of life or neurocognitive function (all p = NS). In those with baseline T levels below 8 nmol/L, T increased vitality (p = 0.004), and reduced reports of feeling down (p = 0.002) and nervousness (p = 0.03). Our findings show that 18 weeks of T therapy increased sexual desire in obese men with OSA independently of baseline T levels whereas improvements in quality of life were evident only in those with T levels below 8 nmol/L. These small improvements would need to be balanced against potentially more serious adverse effects of T therapy on breathing.