OBJECTIVE: To explore the relationship between diabetes and cancer. DESIGN: The Fremantle Diabetes Study (FDS) was a community-based longitudinal observational study of 1426 subjects, 1294 of which had type 2 diabetes. METHODS: The FDS type 2 cohort and four age-, sex- and postcode-matched controls per case were followed for cancer events from 1993 until mid-2010 and incidence rate ratios (IRRs) were calculated. Competing risks proportional hazards models generated risk factors for incident cancers in the diabetic group. RESULTS: There were 309 first cancers over 13 051 patient-years, or 2368 (95% confidence interval (95% CI) 2111-2647)/100 000 patient-years in the diabetes patients vs 1131 over 60 324 patient-years (1875 (1769-1987)/100 000 patient-years) in the controls. For those aged ≥45 years, the risk of all-cause cancer was elevated in type 2 diabetic men (IRRs 1.23, 95% CI 1.04-1.45) and women (1.30, 1.06-1.59). The incidence of colorectal cancer was increased (1.36, 1.01-1.82), especially in diabetic men aged 75-84 years (2.14, 1.22-3.64). Age at diabetes diagnosis (sub-hazard ratio 1.05, 1.02-1.09), calcium channel blocker therapy (2.37, 1.39-4.06), recent exercise (2.11, 1.06-4.20) and serum total cholesterol (0.68, 0.52-0.88) increased colorectal cancer risk. Pancreatic cancer was also more frequent in the diabetic patients (IRR 2.26, 1.20-4.10). Diabetic men and women had similar risks of prostate and breast cancer to those of controls (0.83, 0.59-1.14 and 0.86, 0.52-1.36). CONCLUSIONS: Type 2 diabetes is associated with a moderately increased cancer risk in well-characterised community-based patients, especially pancreatic cancer and colorectal cancer in older men. Recommended cancer screening should be considered as part of routine diabetes management.