Improving our understanding of social inequalities may improve prevention and treatment efforts for diabetes mellitus. We examined the association between individual- and area-level socioeconomic measures and physician-diagnosed diabetes in Saskatchewan over time. In this cross-sectional study, we linked health administrative data with individual-level socioeconomic data from the Canadian Community Health Survey and area-level data from the 2006 Canadian census. We used general linear mixed-models regression to analyze the effect of each factor, controlling for geographic and demographic measures. Area-level deprivation was associated with medically diagnosed type 2 diabetes mellitus after adjustment for the individual-level factors of age, sex, household income and education. Individuals residing in areas ranked in the least deprived quintile had a lower likelihood of diabetes than those in the most deprived quintile (odds ratio 0.40, 95% confidence interval 0.18-0.88). However, this disparity existed only in urban areas. This result may reflect less pronounced health inequalities in rural areas, greater socioeconomic heterogeneity, larger geographic units or some combination of these factors. Individual- and area-level socioeconomic factors were associated with the likelihood of medically diagnosed diabetes; however, the strength of this association varied between urban and rural communities. Acknowledgement of area-level deprivation as a modifiable risk factor related to the prevalence of diabetes is important in the development of effective interventions for urban, but not rural, areas.