Type 2 diabetes (T2DM) is associated with increased fracture risk and higher bone density (BMD), suggesting that diabetic bone is more fragile for a given density. The changes in bone quality that accompany T2DM are still not fully delineated but potential factors include more rapid bone loss, differences in cortical bone and bone structure, and changes in material properties of bone collagen due to accumulation of advanced glycation endproducts (AGEs). Increased fracture risk appears to be concentrated among patients with longer duration of diabetes while those with recent onset or with impaired glucose tolerance may instead be protected from fracture risk. Characteristics of T2DM have contradictory effects on bone strength and fracture risk. Bone strength is generally increased with larger body size and hyperinsulinemia. Features of T2DM that lead to increased bone fragility are not clearly understood but are likely to include hyperglycemia. Higher levels of glucose result in the accumulation of AGEs. In addition, hyperglycemia may have direct and indirect effects on osteocytes, osteoblasts, and osteoclasts resulting in weaker bone. Treatment of T2DM may have generally favorable effects on bone through improvements in glycemic control. However, use of thiazolidinediones (TZDs) in particular causes increased fracture risk in women, due to decreased bone formation and increased bone loss. In sum, substantial evidence now indicates that T2DM results in bone that is more fragile for a given BMD. Further research is needed to understand the specific changes in diabetic bone that cause reduced strength, to clarify the effects of hyperglycemia, and to identify other factors associated with T2DM that reduce bone quality.