This clinical practice position statement, a product of the Fatty Liver Research Group of the Korean Diabetes Association, proposes recommendations for the diagnosis, progression and/or severity assessment, management, and follow-up of non-alcoholic fatty liver disease (NAFLD) in patients with type 2 diabetes mellitus (T2DM). Patients with both T2DM and NAFLD have an increased risk of non-alcoholic steatohepatitis (NASH) and fibrosis and a higher risk of cardiovascular diseases and diabetic complications compared to those without NAFLD. With regards to the evaluation of patients with T2DM and NAFLD, ultrasonography-based stepwise approaches using noninvasive biomarker models such as fibrosis-4 or the NAFLD fibrosis score as well as imaging studies such as vibration-controlled transient elastography with controlled attenuation parameter or magnetic resonance imaging-proton density fat fraction are recommended. After the diagnosis of NAFLD, the stage of fibrosis needs to be assessed appropriately. For management, weight reduction achieved by lifestyle modification has proven beneficial and is recommended in combination with antidiabetic agent(s). Evidence that some antidiabetic agents improve NAFLD/NASH with fibrosis in patients with T2DM is emerging. However, there are currently no definite pharmacologic treatments for NAFLD in patients with T2DM. For specific cases, bariatric surgery may be an option if indicated.