Patients with diabetes are at a high risk of infection-related morbidity and mortality. Klebsiella pneumoniae bacilli are prevalent among diabetic patients, especially in Asian populations. The present study aimed to identify risk factors for in-hospital mortality among diabetic patients complicated by community-acquired K. pneumoniae bacteremia. Methods: We evaluated the clinical characteristics of 341 Taiwanese type 2 diabetic patients who were treated for community-acquired K. pneumoniae bacteremia. We then analyzed outcome predictors, and in particular comorbidities and the site of infection. Results: The overall in-hospital mortality rate was 14.1%. Comorbid cancer was the leading factor, accounting for 32.1% of all cases of mortality. Pulmonary infection, primary bacteremia, afebrile or shock presentation and low serum albumin level were risk factors for in-hospital mortality. Regardless of comorbidities, pulmonary infection [odds ratio (OR) 10.74, 95% confidence interval (CI) 2.02–57.09] and albumin level (OR 0.15, 95% CI 0.03–0.76) were the main risk predictors. The receiver operating characteristic curve indicated that a serum albumin level lower than 2.4 g/dL (71.1% sensitivity and 77.4% specificity) suggested a poor prognosis in the diabetic patients with K. pneumoniae bacteremia. In patients with pulmonary infection, the capsular serotypes of K. pneumoniae were not related to poor outcomes, and an initial presentation of blunted fever or shock were independent factors for mortality. Conclusion: Cancer, pulmonary infection, and low serum albumin levels were independent indicators of in-hospital mortality in the diabetic patients complicated by K. pneumoniae bacteremia. The sites of infection and host characteristics should always elicit medical attention when treating these patients.