Nonalcoholic fatty liver disease(NAFLD) and type 2 DM are common conditions that regularly co–exist and can act synergistically to drive adverse outcomes .The presence of both NAFLD and T2DM increases the likelihood of the development of complications of diabetes(including both micro and macrovascular complications) as well as augmenting the risk of more severe NAFLD,including cirrhosis, hepatocellularcarcinoma anddeath. Diffuse accumulation of fat in hepatocytes, occurring in individuals without a significant history of alcohol consumption is termed as Non–Alcoholic Fatty liver disease (NAFLD). It is a common condition, in which diabetic fatty liver accounts for a larger proportion. As a result of epidemic increase in diabetes mellitus, hypertension, obesity and hyperlipidemia, the prevalence of NAFLD is increasing worldwide. The aim of this study was designed to determine the prevalence of NAFLD in newly diagnosed T2DM (type 2 diabetes mellitus) patients and also to study its risk factors. The present study was conducted in a tertiary care hospital, over a period of 6 months. A total of 100 patients with newly diagnosed T2DM underwentultrasonography to diagnose fatty liver. Patients with NAFLD were compared with those with normal liver ultrasound findings. The risk factors of NAFLD were also evaluated in the study group. Of the 100 diabetic patients enrolled in this study, 67 (67%) presented with NAFLD. The highest prevalence of NAFLD was recorded in the age group of 41–60 years at 35%. The prevalence rate among males (38%) was higher than for females (29%). The prevalence of NAFLD was positively associated with BMI,waist circumference, LDL cholesterol and Triglyceride. This liver disorder is another potential complication in T2DM patients that requires intervention in the associated factors and avoids the evolution of NAFLD to chronicity.