Posttraumatic stress disorder (PTSD) symptom reduction is linked with lower risk of incident type 2 diabetes (T2D), but little is known about the association between PTSD and comorbid T2D outcomes. Whether PTSD is a modifiable risk factor for adverse T2D outcomes is unknown. To determine whether patients with PTSD who improved and no longer met diagnostic criteria for PTSD had a lower risk of adverse T2D outcomes compared with patients with persistent PTSD. This retrospective cohort study used deidentified data from US Veterans Health Administration (VHA) historical medical records (from October 1, 2011, to September 30, 2022) to create a cohort of patients aged 18 to 80 years with comorbid PTSD and T2D. Data analysis was performed from March 1 to June 1, 2024. Diagnoses of PTSD and T2D. The main outcomes were insulin initiation, poor glycemic control, any microvascular complication, and all-cause mortality. Improvement of PTSD was defined as no longer meeting PTSD diagnostic criteria, per a PTSD Checklist score of less than 33. Entropy balancing controlled for confounding. Survival and competing risk models estimated the association between meeting PTSD criteria and T2D outcomes. Subgroup analyses examined variation by age, sex, race, PTSD severity, and comorbid depression status. The study cohort included 10 002 veterans. More than half of patients (65.3%) were aged older than 50 years and most (87.2%) were men. Patients identified as Black (31.6%), White (62.7%), or other race (5.7%). Before controlling for confounding with entropy balancing, patients who no longer met PTSD diagnostic criteria had similar incidence rates for starting insulin (22.4 vs 24.4 per 1000 person-years), poor glycemic control (137.1 vs 133.7 per 1000 person-years), any microvascular complication (108.4 vs 104.8 per 1000 person-years), and all-cause mortality (11.2 vs 11.0 per 1000 person-years) compared with patients with persistent PTSD. After controlling for confounding, no longer meeting PTSD criteria was associated with a lower risk of microvascular complications (hazard ratio [HR], 0.92 [95% CI, 0.85-0.99]). Among veterans aged 18 to 49 years, no longer meeting PTSD criteria was associated with a lower risk of insulin initiation (HR, 0.69 [95% CI, 0.53-0.88]) and all-cause mortality (HR, 0.39 [95% CI, 0.19-0.83]). Among patients without depression, no longer meeting PTSD criteria was associated with a lower risk of insulin initiation (HR, 0.73 [95% CI, 0.55-0.97]). The findings of this cohort study of patients with comorbid PTSD and T2D suggest that PTSD is a modifiable risk factor associated with a modest reduction in microvascular complications. Further research is needed to determine whether findings are similar in non-VHA health care settings.