Objective: Recent epidemiological studies have suggested the association between sarcopenia and nonalcoholic fatty liver disease (NAFLD) in the general population. However, the association between sarcopenia and hepatic steatosis in patients with type 2 diabetes mellitus (T2DM) has not been well studied. Therefore, we investigated the gender-specific impact of sarcopenia on the development of NALFD in patients with T2DM. Methods: In this cross-sectional study, a total of 4,210 patients (2,160 men and 2,050 women) with T2DM were recruited from the Seoul Metabolic Syndrome cohort. Appendicular skeletal muscle mass (ASM) was estimated from bioimpedance analysis measurements and the skeletal muscle mass index (SMI) was calculated by dividing the sum of the ASM by body weight. Sarcopenia was defined as a gender-specific SMI value beyond two standard deviations below the mean for healthy young adults. NAFLD was defined as the presence of hepatic steatosis on ultrasonography without any other causes of chronic liver disease. Results: Among the entire population (mean age 57.4 ± 10.8 years), 1278 (30.4%) subjects had NAFLD and 1240 (29.5%) subjects had sarcopenia. Those with NAFLD had higher body mass index (BMI), waist circumference, blood pressure, total cholesterol, triglyceride and blood pressure and lower HDL-cholesterol. The prevalence of sarcopenia was significantly higher in subjects with NAFLD in both men and women (45.5% vs. 24.7%, p < 0.004 in men; 36.4% vs. 23.9%, p < 0.001 in women). Sarcopenia was significantly associated with the risk of NAFLD (adjusted odds ratio [OR], 1.58; 95% confidence interval [CI], 1.15-2.17) in men but the association was attenuated in women after adjustment for clinical risk factors. Conclusion: Sarcopenia is independently associated with NAFLD in men with T2DM. These findings suggest that sarcopenia may be a risk factor for NAFLD in men with T2DM.