Recent cross-sectional studies revealed that sarcopenia is associated with non-alcoholic fatty liver disease (NAFLD) in general population. However, it remains to be elucidated that the association between skeletal muscle mass index (SMI) and hepatic steatosis in patients with type 2 diabetes. In this cross-sectional study of 145 Japanese patients (79 men and 66 women) with type 2 diabetes, we examined the correlation of SMI with hepatic steatosis. Skeletal muscle mass was estimated from bioimpedance analysis measurements and SMI (%) was defined as skeletal muscle mass (kg)/total body weight (kg) × 100. Controlled attenuation parameter (CAP) evaluated with transient elastography, was used for assessment of hepatic steatosis. In addition, we also investigated the association between SMI and prevalence of NAFLD, which was defined as CAP over 237.8 dm^-1, using logistic regression analysis. Fifty-eight (74%) men and thirty-nine (60%) women had NAFLD. Multiple regression analysis demonstrated that SMI was independently correlated with CAP (β = -0.35, P = 0.007) in men after adjusting for age, body mass index, hemoglobin A1c, triglycerides/ HDL-C ratio, C-reactive protein and gamma-glutamyl transferase. On the other hand, SMI was not associated with CAP in women. Odds ratio per incremental 1% of SMI for prevalence of NAFLD was 0.80 (95% CI 0.64-0.97, P = 0.021) after adjusting for age, BMI, smoking statues, triglycerides/ HDL-C ratio, HbA1c, and gamma-glutamyl transferase in men. In conclusion, SMI was negatively associated with hepatic steatosis in men with type 2 diabetes.