The aim of this study was to describe the metabolome in diabetic kidney disease (DKD) and its association with incident CVD in type 2 diabetes, and identify prognostic biomarkers. From a prospective cohort of individuals with type 2 diabetes, baseline sera (N=1991) were quantified for 170 metabolites using NMR spectroscopy with median 5.2 years of follow-up. Associations of chronic kidney disease (CKD, eGFR<60 ml/min per 1.73 m²) or severely increased albuminuria with each metabolite were examined using linear regression, adjusted for confounders and multiplicity. Associations between DKD (CKD or severely increased albuminuria)-related metabolites and incident CVD were examined using Cox regressions. Metabolomic biomarkers were identified and assessed for CVD prediction and replicated in two independent cohorts. At false discovery rate (FDR)<0.05, 156 metabolites were associated with DKD (151 for CKD and 128 for severely increased albuminuria), including apolipoprotein B-containing lipoproteins, HDL, fatty acids, phenylalanine, tyrosine, albumin and glycoprotein acetyls. Over 5.2 years of follow-up, 75 metabolites were associated with incident CVD at FDR<0.05. A model comprising age, sex and three metabolites (albumin, triglycerides in large HDL and phospholipids in small LDL) performed comparably to conventional risk factors (C statistic 0.765 vs 0.762, p=0.893) and adding the three metabolites further improved CVD prediction (C statistic from 0.762 to 0.797, p=0.014) and improved discrimination and reclassification. The 3-metabolite score was validated in independent Chinese and Dutch cohorts. Altered metabolomic signatures in DKD are associated with incident CVD and improve CVD risk stratification.