Previous studies failed to adjust for estimated glomerular filtration rate (eGFR) in evaluating the association between albuminuria and anemia development, and we aimed to investigate whether albuminuria independently affects anemia development. We conducted a retrospective cohort study and retrospectively identified adults with diabetes from a Japanese nationwide clinical database (JMDC, Tokyo, Japan). To assess the modification effects of albuminuria on the association between eGFR and anemia development, we estimated prevalence of anemia, defined as hemoglobin < 13 g/dL in men and < 12 g/dL in women, using a modified Poisson regression and marginal standardization form of predictive margins, stratified by albuminuria severity after adjusting for eGFR. Hence, we revealed at which eGFR level this modification effect appeared and the extent to which this modification effect increased the prevalence of anemia. We identified 327 999 data points from 48 056 individuals [normoalbuminuria: 186 472 (56.9%), microalbuminuria: 107 170 (32.7%), and macroalbuminuria: 34 357 (10.5%)]. As eGFR declined, anemia prevalence increased. Albuminuria severity modified this association induced by decreased eGFR among individuals with eGFR <30 mL/min/1.73 m2 after adjusting for multivariable factors, including age, sex, comorbidities, and medication use. Compared with the normoalbuminuric group, the macroalbuminuric group had a 5% to 20% higher anemia prevalence among individuals with eGFR of <30 mL/min/1.73 m2. We revealed that the severity of albuminuria modified the association between eGFR and anemia development among individuals with eGFR <30 mL/min/1.73 m2, highlighting the modification effect of albuminuria on the association between kidney function and anemia development in diabetes.