Patients with type 2 diabetes (DM) have a higher risk of developing pulmonary tuberculosis (PTB); moreover, DM co-morbidity in PTB is associated with poor PTB treatment outcomes. Community based prevalence data on DM and prediabetes (pre-DM) among TB patients is lacking, particularly from the developing world. Therefore we conducted a prospective study to investigate the prevalence of DM and pre-DM and evaluated the risk factors for the presence of DM among newly detected PTB patients in rural areas of China. In a prospective community based study carried out from 2010 to 2012, a representative sample of 6382 newly detected PTB patients from 7 TB clinics in Linyi were tested for DM. A population of 6674 non-TB controls from the same community was similarly tested as well. The prevalence of DM in TB patients (6.3%) was higher than that in non-TB controls (4.7%, p<0.05). PTB patients had a higher odds of DM than non-TB controls (adjusted OR 3.17, 95% CI 1.14-8.84). The prevalence of DM increased with age and was significantly higher in TB patients in the age categories above 30 years (p<0.05). Among TB patients, those with normal weight (BMI 18.5-23.9) had the lowest prevalence of DM (5.8%). Increasing age, family history of DM, positive sputum smear, cavity on chest X-ray and higher yearly income (≥10000 RMB yuan) were positively associated and frequent outdoor activity was negatively associated with DM in PTB patients. The prevalence of DM in PTB patients was higher than in non-TB controls with a 3 fold higher adjusted odds ratio of having DM. Given the increasing DM prevalence and still high burden of TB in China, this association may represent a new public health challenge concerning the prevention and treatment of both diseases.