The study objective was to determine whether diabetes is a risk factor for incident hip or major osteoporotic fractures independent of the WHO fracture risk assessment tool (FRAX). Men and women with diabetes (n = 3518) and nondiabetics (n = 36,085) aged ≥50 years at the time of bone mineral density (BMD) testing (1990 to 2007) were identified in a large clinical database from Manitoba, Canada. FRAX probabilities were calculated, and fracture outcomes to 2008 were established via linkage with a population-based data repository. Multivariable Cox proportional hazards models were used to determine if diabetes was associated with incident hip fractures or major osteoporotic fractures after controlling for FRAX risk factors. Mean 10-year probabilities of fracture were similar between groups for major fractures (diabetic 11.1 ± 7.2 versus nondiabetic 10.9 ± 7.3, p = 0.116) and hip fractures (diabetic 2.9 ± 4.4 versus nondiabetic 2.8 ± 4.4, p = 0.400). Diabetes was a significant predictor of subsequent major osteoporotic fracture (hazard ratio [HR] = 1.61, 95% confidence interval [CI] 1.42-1.83) after controlling for age, sex, medication use, and FRAX risk factors including BMD. Similar results were seen after adjusting for FRAX probability directly (HR = 1.59, 95% CI 1.40-1.79). Diabetes was also associated with significantly higher risk for hip fractures (p < 0.001). Higher mortality from diabetes attenuated but did not eliminate the excess fracture risk. FRAX underestimated observed major osteoporotic and hip fracture risk in diabetics (adjusted for competing mortality) but demonstrated good concordance with observed fractures for nondiabetics. We conclude that diabetes confers an increased risk of fracture that is independent of FRAX derived with BMD. This suggests that diabetes might be considered for inclusion in future iterations of FRAX.