Background: The epidemiology and natural history of non-alcoholic fatty liver disease (NAFLD) in diabetes have been mainly investigated in the hospital setting. The goal of this study was to evaluate the characteristics of NAFLD and its impact on morbidity and mortality in type 2 diabetic subjects in a community setting. Method: This study included 199 341 participants in the nationwide Constances cohort. After patients with excessive alcohol consumption, viral hepatitis or other causes of liver disease were excluded, 164 285 were analysed and 8386 (5.3%) were considered to have type 2 diabetes. The non-invasive diagnosis of NAFLD and advanced fibrosis was made using a combination of the fatty liver index and Forns index. Median follow-up was 2.5 years. Results: Diabetes increased the risk of NAFLD by sixfold (adjusted OR 6.05, 95% CI 5.68-6.45) and the risk of advanced fibrosis by 3.76-fold (aOR 3.76, 95% CI 2.87-4.91) in NAFLD subjects. After controlling for confounders, the presence of NAFLD in diabetic subjects was associated with an increased risk of severe liver-related events (aHR 2.53, 95% CI 1.36-4.69), cardiovascular disease (CVD, aHR 2.71, 95% CI 1.72-4.26) and overall mortality (aHR 2.91, 95% CI 1.53-5.53). The risk of hepatic and extrahepatic complications in diabetic subjects with NAFLD significantly increased with the severity of fibrosis (P <.05). Conclusion: This prospective, longitudinal study in a large community-based cohort provides real-world evidence of the risk for NAFLD and advanced fibrosis in diabetes, and its impact on liver disease progression, diabetes-related complications such as CVD, and overall mortality. These data could be used to estimate real clinical and economic burden of NAFLD in diabetic subjects.