Both diabetes mellitus and osteoporosis constitute a notable burden in terms of quality of life and healthcare costs. Diabetes mellitus affecting the skeletal system has been gaining attention in recent years and is now getting recognized as yet another complication of the disease, known as diabetic bone disease. As this condition with weaker bone strength increases fracture risk and reduces the quality of life, so much attention is being paid to investigate the molecular pathways through which both diabetes and its therapy are affecting bone metabolism. Out of many therapeutic agents currently available for managing diabetes mellitus, metformin is one of the most widely accepted first choices worldwide. The purpose of this review is to describe the effects of biguanide-metformin on bone metabolism in type 2 diabetes mellitus including its plausible mechanisms of action on the skeleton. In vitro studies suggest that metformin directly stimulates osteoblasts differentiation and may inhibit osteoclastogenesis by increasing osteoprotegerin expression, both through activation of the AMPK signaling pathway. Several studies in both preclinical and clinical settings report the favorable effects of metformin on bone microarchitecture, bone mineral density, bone turnover markers, and fracture risk. However, animal studies were not specific in terms of the diabetic models used and clinical studies were associated with several confounders. The review highlights some of these limitations and provide future recommendations for research in this area which is necessary to better understand the role of metformin on skeletal outcomes in diabetes.