Background and Aims In patients with NAFLD, those with type 2 diabetes mellitus (DM) have a high risk of progression to HCC. However, the determinants of HCC risk in these patients remain unclear. Approach and Results We assembled a retrospective cohort of patients with NAFLD and DM diagnosed at 130 facilities in the Veterans Administration between 1/1/2004 and 12/31/2008. We followed patients from the date of NAFLD diagnosis to HCC, death, or 12/31/2018. We used landmark Cox proportional hazards models to determine the effects of anti‐DM medications (metformin, insulin, sulfonylureas) and glycemic control (percent of follow‐up time with hemoglobin A1c < 7%) on the risk of HCC while adjusting for demographics and other metabolic traits (hypertension, obesity, dyslipidemia). We identified 85,963 patients with NAFLD and DM. In total, 524 patients developed HCC during a mean of 10.3 years of follow‐up. Most common treatments were metformin monotherapy (19.7%), metformin‐sulfonylureas (19.6%), insulin (9.3%), and sulfonylureas monotherapy (13.6%). Compared with no medication, metformin was associated with 20% lower risk of HCC (HR, 0.80; 95% CI, 0.93–0.98). Insulin had no effect on HCC risk (HR, 1.02; 95% CI, 0.85–1.22; p = 0.85). Insulin in combination with other oral medications was associated with a 1.6 to 1.7‐fold higher risk of HCC. Adequate glycemic control was associated with a 31% lower risk of HCC (HR, 0.69; 95% CI, 0.62–0.78). Conclusions In this large cohort of patients with NAFLD and DM, use of metformin was associated with a reduced risk of HCC, whereas use of combination therapy was associated with increased risk. Glycemic control can serve as a biomarker for HCC risk stratification in patients with NAFLD and diabetes.