The prevalence of type 2 diabetes is higher in patients who have liver diseases, such as nonalcoholic fatty liver disease, chronic viral hepatitis, hemochromatosis, alcoholic liver disease, and cirrhosis. The development of diabetes in patients with cirrhosis is well recognized, but evidence is emerging that the development of chronic liver disease and progression to cirrhosis may occur after the diagnosis of diabetes and that diabetes plays a role in the initiation and progression of liver injury. This article provides an overview of the evidence for an increased prevalence of diabetes in a range of liver diseases; the effect of diabetes on the severity of disease; the potential mechanisms whereby coexistent diabetes exacerbates progression of hepatic fibrosis; and the impact of obesity, insulin resistance, and type 2 diabetes on clinical outcomes.