The association between objective measures of body composition (BC) with type 2 diabetes (T2DM) is inconclusive. We conducted a systematic review and meta-analysis to examine the association between several body composition (BC) indices assessed using dual energy X-ray absorptiometry (DXA), and T2DM. Using PRISMA guidelines, we searched for observational studies investigating BC measures, including total body fat mass (BFM), visceral fat mass (VFM), subcutaneous fat mass (SFM), and fat free mass (FFM); and T2DM. Of 670 titles initially identified, 20 were included. High VFM was consistently associated with T2DM. For every kg increase in VFM, the odds of having T2DM increased by two-fold for males (OR 2.28 [95% CI 1.42 to 3.65], p = 0.001) and more than 4-fold for females (OR 4.24 [1.64 to 11.02], p = 0.003). The presence of T2DM was associated with 2-fold higher odds of low FFM (OR 2.38 [1.44 to 3.95]). We found evidence that greater VFM is a risk factor for prevalent and incident T2DM. While the presence of T2DM is associated with reduced FFM; the relationship between FFM and BFM with T2DM remains unclear. Reducing VFM and increasing FFM through lifestyle changes may reduce the risk of T2DM and mitigate its deleterious effect on BC, respectively.