To estimate the prevalence of Type 2 Diabetes (T2D) in urban and rural settings and identify the specific risk factors for each location. We conducted this study using data from the 2017-18 Bangladesh Demographic and Health Survey (BDHS), sourced from the DHS website. The survey employed a stratified two-stage sampling method, which included 7,658 women and 7,048 men aged 18 and older who had their blood glucose levels measured. We utilized chi-square tests and ordinal logistic regression to analyze the association between various selected variables in both urban and rural settings and their relationship with diabetes and prediabetes. The prevalence of T2D was 10.8% in urban areas and 7.4% in rural areas, while pre-diabetes affected 31.4% and 27% of the populations in these respective settings. The study found significant factors influencing diabetes in both urban and rural regions, particularly in the 55-64 age group (Urban: AOR = 1.88, 95% CI [1.46, 2.42]; Rural: AOR = 1.87, 95% CI [1.54, 2.27]). Highly educated individuals had lower odds of T2D, while wealthier and overweight participants had higher odds in both areas. In rural regions, T2D risk was higher among caffeinated drink consumers and those not engaged in occupation-related physical activity, while these factors did not show significant influence in urban areas. Furthermore, urban participants displayed a significant association between T2D and hypertension. Our study outlines a comprehensive strategy to combat the increasing prevalence of T2D in both urban and rural areas. It includes promoting healthier diets to control BMI level, encouraging regular physical activity, early detection through health check-ups, tailored awareness campaigns, improving healthcare access in rural regions, stress management in urban areas, community involvement, healthcare professional training, policy advocacy like sugary drink taxation, research, and monitoring interventions. These measures collectively address the T2D challenge while accommodating the distinct features of urban and rural settings.