Type 2 diabetes (T2D) is associated with numerous complications, including increased risk of fragility fractures, despite seemingly protective factors [e.g., normal bone mineral density and increased body mass index(BMI)]. However, fracture risk in T2D is underestimated by current fracture risk calculators. Importantly, post-fracture mortality is worse in T2D following any fracture, highlighting the importance of identifying high-risk patients that may benefit from targeted management. Several diabetes-related factors are associated with increased fracture risk, including exogenous insulin therapy, vascular complications, and poor glycaemic control, although detailed comprehensive studies to identify the independent contributions of these factors are lacking. The underlying pathophysiological mechanisms are complex and multifactorial, with different factors contributing during the course of T2D disease. These include obesity, hyperinsulinaemia, hyperglycaemia, accumulation of advanced glycation end products, and vascular supply affecting bone-cell function and survival and bone-matrix composition. This review summarises the current understanding of the contributors to impaired bone health in T2D, and proposes an updated approach to managing these patients.