Summary Bone mineral density (BMD) is less useful for evaluating fracture risk in type 2 diabetes. This study showed for the first time that combined evaluation by serum insulin-like growth factor-I and BMD is useful to assess the risk of vertebral fracture in postmenopausal women and men with type 2 diabetes. Introduction BMD is less useful for evaluating fracture risk in type 2 diabetes mellitus (T2DM). We aimed to examine the usefulness of combined evaluation by BMD and serum insulin-like growth factor-I (IGF-I) to assess the risk of vertebral fracture (VF) in T2DM. Methods In this cross-sectional study, 412 postmenopausal women and 582 men with T2DM, whose BMD, bone turnover markers, and serum IGF-I were measured, were enrolled. The association of BMD alone, serum IGF-I alone, and combined assessment by BMD and IGF-I with the presence of VF was examined. Results Multiple logistic regression analyses showed that IGF-I as well as BMD T-score at lumbar (L) and femoral neck (FN) were significantly associated with VF except for IGF-I in men, respectively. Receiver operating characteristic curves showed that the cutoff values of IGF-I, L T-score and FN T-score were 127 ng/mL, − 1.78, and − 2.02 in postmenopausal women and 127 ng/mL, − 1.67, and − 1.24 in men. Based on the cutoff vales, the subjects were divided into four categories. The category of lower IGF-I and lower T-scores had a significant increased risk of VF compared to higher IGF-I and higher T-scores both in postmenopausal women and in men. The sensitivity and specificity of the combined assessment to detect VF were better compared to using BMD alone or IGF-I alone. Conclusions This is the first study to show that in addition to BMD measurement, the assessment using serum IGF-I is useful to estimate the prevalence of VF in patients with T2DM.