Fear of infection, the epidemic situation, unexpected lockdown, and implementation of online classes are most likely affecting the psychological well-being of students during the COVID-19 pandemic. Therefore, this study aims to assess the level of knowledge, anxiety, and psychological distress concerning COVID-19 and their association with fear, gender, age, history of mental illness, time spent reading about COVID-19, program of study, and type of dwelling among students in the United Arab Emirates (UAE). In this cross-sectional study, 433 students participated in a web-based survey. These were students at the University of Sharjah, coming from all the emirates of the UAE. Demographic scale, COVID-19 knowledge, anxiety, fear, and psychological distress scales were used to screen these problems. Of the 433 students, 278 (64.2%) were male and 155 (35.8%) were female. Overall, 353 (81.5%) exhibited adequate knowledge of COVID-19. Sixty-nine (15.9%) of students were anxious and 221 (51%) were in psychological distress. Students who exhibited anxiety concerning COVID-19 anxiety (odds ratio [OR]: 2.98) and fear (OR: 1.27), and who spent more than 4 h reading about COVID-19 (OR: 11.20) were more psychologically distressed. Students with a history of mental illness showed adequate knowledge of COVID-19; however, they were more psychologically distressed (OR: 5.93). Older students were less likely to have psychological distress (OR: 0.87). Students possess adequate knowledge concerning COVID-19; however, they are psychologically distressed. Age, dwelling status, history of mental illness, anxiety, and fear significantly predicted psychological distress. Frequent web-based workshops that include insight, guidance, online counseling, scheduled activity, and coping mechanisms for COVID-19 are highly recommended. The authors discuss the implications for future research and provide recommendations for students and educational institutions.