Preclinical studies demonstrated that bone plays a central role in energy metabolism. However, how bone metabolism is related to the risk of diabetes in humans is unknown. We investigated the association of bone health (bone mineral density [BMD] and bone turnover markers) with incident type-2 diabetes mellitus (T2DM) based on the Hong Kong Osteoporosis Study (HKOS). A total of 993 and 7160 participants from the HKOS were studied for the cross-sectional and prospective analyses, respectively. The cross-sectional study evaluated the association of BMD and bone biomarkers with fasting glucose and glycated hemoglobin (Hb_A1c) levels, whereas the prospective study examined the associations between BMD at study sites and the risk of T2DM by following subjects a median of 16.8 years. Body mass index (BMI) was adjusted in all full models. Mendelian randomization (MR) was conducted for causal inference. In the cross-sectional analysis, lower levels of circulating bone turnover markers and higher BMD were significantly associated with increased fasting glucose and Hb_A1c levels. In the prospective analysis, higher BMD (0.1 g/cm²) at the femoral neck and total hip was associated with increased risk of T2DM with hazard ratios (HRs) of 1.10 (95% confidence interval [CI], 1.03 to 1.18) and 1.14 (95% CI, 1.08 to 1.21), respectively. The presence of osteoporosis was associated with a 30% reduction in risk of T2DM compared to those with normal BMD (HR = 0.70;​ 95% CI, 0.55 to 0.90). The MR results indicate a robust genetic causal association of estimated BMD (eBMD) with 2-h glucose level after an oral glucose challenge test (estimate = 0.043;​ 95% CI, 0.007 to 0.079) and T2DM (odds ratio = 1.064;​ 95% CI, 1.036 to 1.093). Higher BMD and lower levels of circulating bone biomarkers were cross-sectionally associated with poor glycemic control. Moreover, higher BMD was associated with a higher risk of incident T2DM and the association is probably causal.