Background: A few instruments that identify and valuate health states are based on the International Classification of Functioning, Disability and Health States of the World Health Organization. One of them is the Health State Description (HSD) questionnaire first used in the World Health Survey (WHS) initiative (HSD-WHS), whose psychometric properties have not been evaluated in Chile. Additionally, the use of latent variables for the valuation process of health states has been scarcely investigated in the context of population health metrics. We aim to evaluate the psychometric properties and factorial structure of the HSD-WHS for Chile and describe a latent variable method for valuating health states associated with diseases. Methods: We used data from the second Chilean National Health population-based survey from 2009 to 2010 (N = 5293). We explored the factorial structure of the HSD-WHS through exploratory and confirmatory factor analyses, the reliability, and the discriminant validity of the latent variable of disability. Disability weights for diseases were calculated using a linear regression model. Results: We found an adequate goodness of fit for a second-order model with 9 factors corresponding to disability domains (Tucker–Lewis index = 0.99, comparative fit index = 0.99, root mean square error of approximation = 0.060), and good reliability estimates (standardized α = 0.91). The rescaled (between 0 and 100) latent variable of disability showed significant difference according to the explored variables. We estimated disability weights for the following: (1) depressive episode, 13.6 (12.1-15.2), (2) hypertension, 1.6 (0.0-3.3), and (3) diabetes, 5.0 (2.5-7.4). Conclusions: This study supports the use of the HSD-WHS questionnaire in the Chilean population and a latent variable approach for valuating health states associated with diseases.