To analyze the association between non-alcoholic fatty liver disease (NAFLD) and the incidence of diabetic nephropathy in patients with type 2 diabetes, the incidence of diabetic nephropathy was assessed in 413 type 2 diabetic patients, by testing the 24 h urinary albumin excretion rate (UAER). The NAFLD was diagnosed based on patient's medical history and liver ultrasound. The difference in diabetic nephropathy incidence between patients with and without NAFLD was tested by chi(2). Multivariate logistic regression analysis was used to assess the factors associated with diabetic nephropathy among type 2 diabetic patients. Total 363 out of 413 type 2 diabetic patients were enrolled in this study. The incidences of NAFLD and diabetic nephropathy in participants were approximately 56% (202/363) and 38% (137/363) respectively, and there was no significant difference in the prevalence of diabetic nephropathy between patients with and without NAFLD (37.1% vs. 38.5%, p = 0.787). The duration of diabetes (odds ratio [OR] 1.065, 95% confidence interval [CI] 1.014-1.120, p = 0.012), waist circumference (OR 1.077, 95% CI 1.040-1.116, p = 0.000), and fasting blood glucose (FBG; OR 1.136, 95% CI 1.023-1.1262, p = 0.017) were significantly associated with diabetic nephropathy, whereas sex, high blood pressure, total cholesterol (TC), triglyceride (TG), and ankle brachial pressure index (ABI) were not significantly associated with the disorder. The present results suggest that NAFLD is not related to the incidence of diabetic nephropathy in type 2 diabetes, but the duration of diabetes, waist circumference, and FBG are important factors for diabetic nephropathy in type 2 diabetes.