Background: A significant health issue impacting a sizable portion of the global population is diabetes mellitus. The present study compared thyroid function in patients of type 2 diabetes mellitus without nephropathy and type 2 diabetes mellitus with nephropathy. Materials & Methods: 90 patients of type 2 diabetes mellitus were divided into group I (without nephropathy) and group II (with nephropathy). Thyroid function in both groups was compared. Results: Group I comprised 26 males and 19 females and group II 22 males and 23 females. Thyroid level was normal in 30 in group I and 23 in group II, low T3 syndrome in 8 in group I and 15 in group II, subclinical hypothyroidism in 4 in group I and 5 in group II and overt hypothyroidism in 3 in group I and 1 in group II. The difference was significant (P< 0.05). There was correlation of TSH with SCr, eGFR and UACR in group II (P< 0.05). Conclusion: The prevalence of thyroid dysfunction was higher in patients with diabetic nephropathy. Therefore, in order to enhance quality of life and lower morbidity, thyroid hormone assessment in type 2 diabetics and diabetic nephropathy is necessary.