© The Author 2015. Published by Oxford University Press on behalf of the British Geriatrics Society. All rights reserved. Aims: fear of falling is an important falls-related symptom that has received little attention in studies of falls risk in older adults with type 2 diabetes. Methods: matched pairs of participants with diabetes or with normoglycaemia (n = 186 per group) recruited from a community-based survey underwent an assessment of fear of falling and associated falls risk factors. Multivariate methods examined associations between fear of falling and risk factors for history of recent falls. Results: compared with the normoglycaemic participants, those with diabetes had worse mobility (slow timed Up and Go test times: 16.2 versus 4.9%, P <0.01), more fear of falling (24.2 versus 15.1%, P <0.05) and more activity restriction from fear of falling (indoors: 14.0 versus 4.8%, P = 0.006), but there was no increase in reported recent falls. In the combined sample, a history of recent falls was negatively associated with fear-related limitation of outdoor activities (odds ratio (95% confidence interval): 0.30 (0.15-0.58), P <0.001) and positively associated with age (1.65 (1.20-2.28) per 10-year increase, P = 0.002) and use of antidepressants (2.14 (1.02-4.50, P = 0.044). The frequency of falls in those with recurrent falls was negatively associated with measures of balance. Conclusions: type 2 diabetes is associated with increased fear of falling and fear-associated activity restriction, and this modifies the risk of falls even in the face of increased falls risk factors including worse mobility. Future studies of falls in diabetes need to consider that fear of falling is an important modifier of the relationship between risk factors and falls.