We examined the prospective association of childhood BMI z-score and BMI categories (normal or overweight) with young adult diabetes, controlling for early life, childhood, and adolescence factors. A subsample of 2,639 young adults from the Mater-University study of pregnancy (MUSP) and its outcomes, a prospective birth cohort who were born in Brisbane, Australia and for whom we had measured height and weight at 5 years and self-reported diabetes at age 21 years. The risk of developing diabetes by age 21 years was greater among young adults who had greater BMI z-score or were overweight at age 5 years than those who had normal BMI at age 5 years. Young adults who were overweight at age 5 years had an increased odds ratio of 2.60 (95% confidence interval (CI): 1.29, 5.22, in age- and sex-adjusted model) of experiencing diabetes by age 21 years. Adjustment for potential confounders and mediators including intrauterine environmental factors, childhood dietary patterns, television watching, participation in sports and exercise, and current weight, did not substantively alter these associations. Overweight and increasing BMI z-score at childhood is an independent predictor of young adult's type 1 and type 2 diabetes. Findings of this study suggest that childhood BMI may be central to the development and rising incidence of all diabetes.