The incidence of diabetes is increasing tremendously throughout the world especially in the developing countries. This disease affects various organs like eyes, nerves, kidneys and the heart. In this study, we investigated whether lungs are also one of the target organs of diabetes mellitus or not. To assess the pulmonary function parameters including alveolar gas exchange in patients with Type 2 Diabetes mellitus and to find the influence of hyperglycaemia and duration of diabetes. This cross sectional study involved 30 type II diabetic patients of age 30-60 years attending the diabetic outpatient department of SRM Medical College & Research Centre and 30 age and sex matched non-diabetic subjects as controls. The glycated haemoglobin (HbA1c) levels, fasting and post prandial blood glucose levels, pulmonary function parameters such as Forced Vital Capacity (FVC), Forced Expiratory Volume in 1 second (FEV1), Forced Expiratory Volume Percentage (FEV1 /FVC), Peak Expiratory Flow Rate (PEFR), Forced Expiratory Flow (25 - 75%), Peak Inspiratory flow ( PIF), Forced Inspiratory Vital Capacity ( FIVC), Total Lung Capacity ( TLC),Diffusing capacity of lung for carbon monoxide( DLCO) were measured for all the participants using Easyone Pro computerised spirometer. DLCO was measured by single breath Carbon Monoxide (CO) diffusion test. The alveolar membrane permeability was assessed by evaluating the ratio of DLCO to Alveolar Ventilation (VA). The pulmonary function parameters FVC, FEV1, PEFR, PIF, FIVC, TLC , DLCO and DLCO/VA were significantly low (p<0.05) in patients with type II diabetes mellitus when compared to control group. The DLCO and DLCO/VA were significantly lower (p<0.05) in patients with poor glycemic control(HbA1c > 7). We conclude that the pulmonary function parameters like FVC, FEV1, PEFR, PIF, FIVC, TLC and alveolar gas exchange were significantly reduced in patients with type II diabetes. The patients with Type II diabetes mellitus had a restrictive pattern of respiratory abnormality. The patients with poor glycaemic control( HbA1c > 7) had reduced alveolar diffusion which was not dependent on the duration of diabetes. The impaired respiratory function may give way for the development of pulmonary complications. Spirometry can be used as a screening tool among diabetics as an early preventive measure.