Type 2 diabetes mellitus (T2DM) is associated with an increased risk of fractures according to several studies. The underlying mechanisms remain unclear, although small case-control studies indicate poor quality of the cortical bone. We have studied a population-based sample of women aged 75 to 80 years in Gothenburg, randomly invited from the population register. Areal bone mineral density (aBMD) was measured by dual-energy X-ray absorptiometry (Hologic Discovery A), bone microarchitecture by high-resolution peripheral quantitative computed tomography (HR-pQCT; ExtremeCT from Scanco Medical AG), and reference point indentation was performed with Osteoprobe (Active Life Scientific). Women with T2DM (n=99) had higher aBMD compared to controls (n=954). Ultradistal tibial and radial trabecular bone volume fraction (+11% and +15%, respectively), distal cortical volumetric BMD (+1.6% and +1.7%), cortical area (+11.5% and +9.3%), and failure load (+7.7% and +12.9%) were higher in diabetics than in controls. Cortical porosity was lower (mean +/- SD: 1.5%+/- 1.1% versus 2.0%+/- 1.7%, p=0.001) in T2DM in the distal radius but not in the ultradistal radius or the tibia. Adjustment for covariates (age, body mass index, glucocorticoid treatment, smoking, physical activity, calcium intake, bone-active drugs) eliminated the differences in aBMD but not in HR-pQCT bone variables. However, bone material strength index (BMSi) by reference point indentation was lower in T2DM (74.6 +/- 7.6 versus 78.2 +/- 7.5, p<0.01), also after adjustment, and women with T2DM performed clearly worse in measures of physical function (one leg standing: -26%, 30-s chair-stand test: -7%, timed up and go: +12%, walking speed: +8%; p<0.05-0.001) compared to controls. In conclusion, we observed a more favorable bone microarchitecture but no difference in adjusted aBMD in elderly women with T2DM in the population compared to nondiabetics. Reduced BMSi and impaired physical function may explain the increased fracture risk in T2DM. (c) 2016 American Society for Bone and Mineral Research.