Aims/hypothesis. There is accumulating evidence that depression is common in people with Type 2 diabetes. However, most prevalence-studies are uncontrolled and could also be inaccurate from selection-bias, as they are conducted in specialized treatment settings. We studied the prevalence and risk factors of co-morbid depression in a community-based sample of older adults, comparing Type 2 diabetic patients with healthy control subjects. Methods. A large (n=3107) community-based study in Dutch adults (55-85 years of age) was conducted. Pervasive depression was defined as a CES-D score greater than 15. Diagnosis of Type 2 diabetes was obtained from self-reports and data from general practitioners. Results. A number of 216 patients (7%) were identified as having Type 2 diabetes. The prevalence of pervasive depression was increased in people with Type 2 diabetes and co-morbid chronic disease (20%) but not in patients with Type 2 diabetes only (8%), compared with the healthy control subjects (9%). Regression analyses in diabetic patients yielded that being single, being female, having functional limitations, receiving instrumental support and having an external locus of control were associated with higher levels of depression. Conclusions/interpretation. The Results suggest that the prevalence of pervasive depression is increased in patients with Type 2 diabetes and co-morbid disease(s), but not in patients with Type 2 diabetes only. Functional limitations that often accompany co-morbid chronic disease could play an essential role in the development of depression in Type 2 diabetes. These findings can enable clinicians and researchers to identify high-risk groups and set up prevention and treatment programs.