Background: Term NAFLD includes fatty liver changes from steatosis to steatohepatitis, cirrhosis, hepatocellular carcinoma; histologically resembling alcohol induced liver damage, in absence of alcohol intake. Metabolic syndrome and associated co morbidities like obesity, T2DM, Dyslipidemia predisposes for NAFLD. Around 70% T2DM have fatty liver, In India, its reported to be 12.5-87.5%. Liver biopsy is gold standard for diagnosis and staging of NAFLD, since its invasive hence not used as a screening tool. Ultrasound detects hepatic steatosis with 89% sensitivity and 93% specificity, can serve as a screening tool to detect NAFLD. Aims: 1) To Study prevalence of NAFLD in T2DM patients 2) To Study risk factors like age, duration of T2DM, BMI, WHR, Hypertension, Liver enzymes, FBS, PPBS, HbA1C and Lipid profile in both NAFLD and Control groups. 3) To correlate above risk factors in both groups. Material and Methods: 100 Non-Alcoholic T2DM patients, 30 - 80 years, with evidence of Fatty Liver on ultrasound, formed study group (n=50) and those without Fatty Liver formed control group (n=50). Detailed clinical examination and necessary blood tests were done. 15 NAFLD patients were subjected for histopathology after liver biopsy. SPSS 17 used for analysis of continuous data variables, expressed as Mean ± SD. Student t-test for comparison of mean values. Group comparisons ANOVA and Karl Pearson Correlation was used to find statistical significance of study parameters in NAFLD and Control Groups. ‘p’ < 0.05 was considered statistically significant. Results and conclusions: Prevalence of NAFLD in T2DM was 40.32 %, mostly in 5th - 6th decade and increased with duration of T2DM. Ultrasound grade I and II steatosis seen in 88% diabetics. Histopathology grade I and II steatosis seen in 86.67% and NASH grade I in 2 cases and stage I fibrosis in 2 cases. There was significant correlation of prevalence of NAFLD with obesity, abnormal liver function tests, T2DM, Hypertension, Dyslipidemia and Metabolic Syndrome.