Diabetes in elderly adults is associated with an increased risk of fall. The aim of study was to determine whether a virtual reality exercise (VRE) program would improve balance, strength, gait, and falls efficacy in elderly adults with diabetes. Fifty-five subjects with diabetes mellitus over 65 years of age were randomly assigned to a VRE group (VREG) (n=27) and a control group (CG) (n=28). The VREG received the VRE program and diabetes education, whereas the CG received only the diabetes education. The VRE program used video gaming (PlayStation(®) 2; Sony, Tokyo, Japan) and was conducted for 50 min twice a week for 10 weeks. Balance, muscle strength, gait, and falls efficacy were measured at baseline and after intervention. Measurements were taken using a clinical tests (the one-leg-standing test, the Berg Balance Scale, the functional reach test, the timed up-and-go test, and the sit-to-stand test), and gait analysis. A self-administered questionnaire was used to measure falls efficacy. After training, the VREG showed significantly improved balance, decreased sit-to-stand times, and increased gait speed, cadence, and falls efficacy. The VRE program was to maximize the effects of exercise by triggering players was to be fully immersed into the games and enhanced major influential factors on the falls of subject. This study suggests VRE programs are feasible and effective for reduced the risk of falls in elderly adults with type 2 diabetes.