Previous studies have analyzed the impact of diabetes mellitus on labor market participation by men and women, but gender difference between type 2 diabetes mellitus (T2DM) and employment has not been the focus. This study aims to explore gender differences between T2DM and employment status. Data from the Korea Health Panel Study, 2013–2015 were analyzed by distinguishingT2DM and non-diabetes (N = 11,216). The empirical model was established and the generalized two-stage least squares (2SLS) was estimated, controlling for endogeneity. A family history of diabetes, as an instrumental variable, was related to an individual’s genetic predisposition to develop diabetes. The estimated results for the 2SLS showed the interaction effects between T2DM and employment. T2DM had a statistically significant and negative effect on employment for women only. The comparison with non-diabetes showed that women with T2DM had a lower probability of employment by 51.9% (p < 0.05). Exposing gender bias in employment suggests that healthcare policies and disease management programs for diabetic patients should adopt gender-specific remedies.