It is unknown whether chronic kidney disease (CKD) is associated with nonalcoholic fatty liver disease among patients with type 2 diabetes. We followed 1760 outpatients with type 2 diabetes and normal or near-normal kidney function and without overt proteinuria for 6.5 yr for the occurrence of CKD (defined as overt proteinuria and/or estimated GFR <60 ml/min per 1.73 m(2)). During follow-up, 547 participants developed incident CKD. Nonalcoholic fatty liver disease, diagnosed by liver ultrasound and exclusion of other common causes of chronic liver disease, was associated with a moderately increased risk for CKD (hazard ratio 1.69; 95% confidence interval 1.3 to 2.6; P < 0.001). Adjustments for gender, age, body mass index, waist circumference, BP, smoking, diabetes duration, glycosylated hemoglobin, lipids, baseline estimated GFR, microalbuminuria, and medications (hypoglycemic, lipid-lowering, antihypertensive, or antiplatelet drugs) did not appreciably attenuate this association (hazard ratio 1.49; 95% confidence interval 1.1 to 2.2; P < 0.01). In conclusion, our findings suggest that nonalcoholic fatty liver disease is associated with an increased incidence of CKD in individuals with type 2 diabetes, independent of numerous baseline confounding factors.