Diabetes mellitus is the fifth leading cause of death in the United States; 17 million people are affected. Liver disease is one of the leading causes of death in persons with type 2 diabetes. The standardized mortality rate for death from liver disease is greater than that for cardiovascular disease. The spectrum of liver disease in type 2 diabetes ranges from nonalcoholic fatty liver disease to cirrhosis and hepatocellular carcinoma. The incidence of hepatitis C and acute liver failure is also increased. Nonalcoholic fatty liver disease is now considered part of the metabolic syndrome, and, with alcohol and hepatitis C, is the most common cause of chronic liver disease in the United States. Weight reduction and exercise are the mainstays of treatment for nonalcoholic fatty liver disease, but there are promising results with the new thiazolidinediones (pioglitazone and rosiglitazone) as well as metformin and 3-hydroxy-3-methylglutaryl coenzyme A inhibitors.