Non-alcoholic (now: metabolic) steatohepatitis (MASH) is the progressive inflammatory form of metabolic dysfunction-associated steatotic liver disease (MASLD), which often coexists and mutually interacts with type 2 diabetes (T2D), resulting in worse hepatic and cardiovascular outcomes. Understanding the intricate mechanisms of diabetes-related MASH progression is crucial for effective therapeutic strategies. This review delineates the multifaceted pathways involved in this interplay and explores potential therapeutic implications. The synergy between adipose tissue, gut microbiota, and hepatic alterations plays a pivotal role in disease progression. Adipose tissue dysfunction, particularly in the visceral depot, coupled with dysbiosis in the gut microbiota, exacerbates hepatic injury and insulin resistance. Hepatic lipid accumulation, oxidative stress, and endoplasmic reticulum stress further potentiate inflammation and fibrosis, contributing to disease severity. Dietary modification with weight reduction and exercise prove crucial in managing T2D-related MASH. Additionally, various well-known but also novel anti-hyperglycemic medications exhibit potential in reducing liver lipid content and, in some cases, improving MASH histology. Therapies targeting incretin receptors show promise in managing T2D-related MASH, while thyroid hormone receptor-β agonism has proven effective as a treatment of MASH and fibrosis.