Speaking to The Times of London, Lydon explained that the stress of grieving for Ari Up has taken its toll on his wife Nora.
"We're a little on the dismal side. It's pain, pain, pain," he said. "Nora's taking it really bad."
The former Sex Pistols frontman also revealed that paying for his stepdaughter's cancer treatments has left his family in dire financial straits.
The musician explained: "We had to pay for Ari's treatment, which set us back a f**king sizeable chunk moneywise. The stress is killing us - the debris of family all around."
Last week, Lydon announced that he was putting a planned Public Image Ltd reunion on hold to help his wife grieve.