Summary In an observational study population of 62,413 individuals (6,455 10 % with diabetes), diabetes was independently associated with major osteoporotic fractures (MOFs) but did not significantly modify the effect of FRAX TM risk factors or prior fracture site. However, the presence of diabetes exerted a much stronger effect on hip fracture risk in younger versus older individuals. Introduction Diabetes mellitus increases fracture risk independent of risk factors that comprise the WHO FRAX TM tool. We explored whether diabetes modifies the effect of FRAX clinical risk factors on MOF and hip fracture risk. Methods Using a registry of clinical dual-energy X-ray absorptiometry (DXA) results for Manitoba, Canada, we identified women and men aged 40 years and older undergoing baseline DXA in 1996–2011. Health services data were used to identify diabetes diagnosis, FRAX risk factors and incident fractures using previously validated algorithms. Prior fracture was stratified as clinical vertebral, hip, humerus, forearm, pelvis and ‘other’. Cox proportional hazards models were used to test for statistical interactions of diabetes with FRAX clinical risk factors and prior fracture site. Results During a mean follow-up of 6 years, there were 4,218 MOF and 1,108 hip fractures. Diabetes was a significant independent risk factor for MOF adjusted for FRAX risk factors including bone mineral density (BMD) (adjusted hazard ratio aHR 1.32 95 % confidence interval (CI) 1.20–1.46). No significant interactions of FRAX risk factors or prior fracture site with diabetes were identified in analyses of MOF. For predicting hip fractures, age significantly modified the effect of diabetes (aHR age <60, 4.67 95 % CI 2.76–7.89, age 60–69, 2.68 1.77–4.04, age 70–79, 1.57 1.20–2.04, age >80, 1.42 1. 10–1.99; p interaction <0.001). Conclusions Diabetes is an independent risk factor for MOFs and does not significantly modify the effect of FRAX risk factors or prior fracture site. However, diabetes exerts a much stronger effect on hip fracture risk in younger than older individuals which needs to be considered in hip fracture prediction.