Background Raised C-reactive protein (CRP) is a risk factor for type 2 diabetes. According to the Mendelian randomization method, the association is likely to be causal if genetic variants that affect CRP level are associated with markers of diabetes development and diabetes. Our objective was to examine the nature of the association between CRP phenotype and diabetes development using CRP haplotypes as instrumental variables. Methods and Findings We genotyped three tagging SNPs (CRP + 2302G > A; CRP + 1444T > C; CRP + 4899T > G) in the CRP gene and measured serum CRP in 5,274 men and women at mean ages 49 and 61 y (Whitehall II Study). Homeostasis model assessment-insulin resistance (HOMA-IR) and hemoglobin A1c (HbA1c) were measured at age 61 y. Diabetes was ascertained by glucose tolerance test and self-report. Common major haplotypes were strongly associated with serum CRP levels, but unrelated to obesity, blood pressure, and socioeconomic position, which may confound the association between CRP and diabetes risk. Serum CRP was associated with these potential confounding factors. After adjustment for age and sex, baseline serum CRP was associated with incident diabetes (hazard ratio = 1.39 [95% confidence interval 1.29-1.51], HOMA-IR, and HbA1c, but the associations were considerably attenuated on adjustment for potential confounding factors. In contrast, CRP haplotypes were not associated with HOMA-IR or HbA1c (p=0.52-0.92). The associations of CRP with HOMA-IR and HbA1c were all null when examined using instrumental variables analysis, with genetic variants as the instrument for serum CRP. Instrumental variables estimates differed from the directly observed associations (p=0.007-0.11). Pooled analysis of CRP haplotypes and diabetes in Whitehall II and Northwick Park Heart Study II produced null findings (p=0.25-0.88). Analyses based on the Wellcome Trust Case Control Consortium (1,923 diabetes cases, 2,932 controls) using three SNPs in tight linkage disequilibrium with our tagging SNPs also demonstrated null associations. Conclusions Observed associations between serum CRP and insulin resistance, glycemia, and diabetes are likely to be noncausal. Inflammation may play a causal role via upstream effectors rather than the downstream marker CRP.