Deterioration of glycaemic control in people with long-standing diabetes mellitus (diabetes) may be a possible indicator of pancreatic cancer. However, the magnitude of the association between diabetes deterioration and pancreatic cancer has received little attention. We conducted a matched cohort study, nested within a population-based cohort of Australian women with diabetes. Women with unstable diabetes, defined as a change in medication after a 2-year period of stable medication use, were matched by birth year to those with stable diabetes, in a 1:4 ratio. We used flexible parametric survival models to estimate hazard ratios (HRs) and 95% confidence intervals (CI). We included 134,954 and 539,789 women in the unstable and stable diabetes cohorts, respectively (mean age 68 years). In total, 1,315 pancreatic cancers were diagnosed. Deterioration of stable diabetes was associated with a 2.5-fold increased risk of pancreatic cancer (HR 2.55; 95% CI 2.29-2.85). The risk was particularly high within the first year after diabetes deteriorated. HRs at 3 months, 6 months and 1 year were: 5.76 (95% CI 4.72-7.04); 4.56 (95% CI 3.81-5.46); and 3.33 (95% CI 2.86-3.89), respectively. The risk was no longer significantly different after 7 years. Deterioration in glycaemic control in people with previously stable diabetes may be an indicator of pancreatic cancer, suggesting investigations of the pancreas may be appropriate. The weaker longer-term (3-7 years) association between diabetes deterioration and pancreatic cancer may indicate that poor glycaemic control can be a risk factor for pancreatic cancer.