BACKGROUND: Non alcoholic fatty liver disease (NAFLD) is a common chronic condition of which Diabetic fatty liver accounts for a large proportion, with 50 to 75% of the subjects demonstrating fat in the liver on Ultrasound. As a result of epidemic increase in obesity, hyperlipidemia and our diabetes mellitus patients , the prevalence of NAFLD in the general population is increasing. The aim of this study is to determine the frequency of NAFLD in type 2 diabetic patients in our setup at Jinnah postgraduate Medical Center,Karachi Pakistan. METHODS: A total of 120 type 2 diabetic patients were included in the study. Patients with known chronic liver disease and history of alcohol intake were excluded. These patients were evaluated by abdominal ultrasonography to determine the presence of fatty liver. They were divided into fatty liver group and non fatty liver group; and were further evaluated by measurement of body mass index, HbA1c, liver function tests and lipid profile. The data obtained was analyzed using SPSS version 10.0 RESULTS: Out of 120 type 2 diabetic patients, 73 (60.8 %) had fatty liver on ultrasonography. An increase in the BMI and levels of HBA1c, ALT, AST, alkaline phosphatase and GGT, total cholesterol, triglycerides, LDL and a decrease in HDL was observed in the fatty liver group as compared to non fatty liver group. CONCLUSION: The prevalence of NAFL is higher in type-2 diabetic patients. Obesity, dysglycemia, dyslipidemia and elevated liver enzymes are seen more frequently in fatty liver than nonfatty liver type-2 diabetic patients