Although patients with type 2 diabetes (T2DM) have an increased risk of hip fracture, risk of vertebral fracture (VF) and its association with BMD are still unclear. We examined Japanese T2DM patients (161 men >50 yr and 137 postmenopausal women) and non-DM controls (76 and 622, respectively) by lateral spine radiography and DXA at the lumbar spine (L), femoral neck (FN), and radius (R). Logistic regression analysis adjusted for age, body mass index, and L-BMD showed that the presence of T2DM was an independent risk factor for prevalent VFs in women (OR = 1.86, p = 0.019) and men (OR = 4.73, p < 0.001). BMD at any site, however, was not significantly associated with the presence of prevalent VFs in T2DM patients, in contrast to the significant association in controls (at least p = 0.010). Comparison of T2DM patients with and without VFs showed no significant differences in BMD values, bone markers, or diabetes status. Receiver operating characteristic analysis showed that the absolute L-, FN-, and R-BMD values for detecting prevalent VFs were higher in T2DM patients than controls, whereas their sensitivity and specificity were lower. T2DM patients may have an increased risk of VFs independent of BMD or diabetic complication status, suggesting that bone quality may define bone fragility in T2DM.