The aim of this study was to determine the association between type-2 diabetes mellitus (DM), BMD and fractures in 6,655 men and women aged 55 years and over from the Rotterdam Study. We compared subjects with type-2 DM to subjects without DM. Additionally, subset analyses were performed, dividing subjects on the basis of the glucose tolerance test into already treated DM, newly diagnosed DM, impaired glucose tolerance (IGT) and normal glucose tolerance (NGT, reference). Femoral neck and lumbar spine BMD were measured using DEXA. Nonvertebral fracture ascertainment was performed using an automated record system involving GPs and local hospitals. Although subjects with DM had higher BMD, they had an increased nonvertebral fracture risk: hazard ratio (HR) 1.33 (1.00–1.77). In subset analysis, the increased fracture risk appeared restricted to treated DM subjects only: HR 1.69 (1.16–2.46). Subjects with IGT had a higher BMD, but contrary to treated DM, they had a lower fracture risk: HR 0.80 (0.63–1.00). In conclusion, subjects with type-2 DM and IGT both have a higher BMD. Whereas, subjects with IGT have a decreased fracture risk, subjects with DM (primarily those with already established and treated DM) had an increased fracture risk, probably due to long-term complications associated with DM.