OBJECTIVE To assess the association and familial coaggregation between early-onset type 2 diabetes (diagnosed before age 45 years) and mood, anxiety, and stress-related disorders and estimate the contribution of genetic and environmental factors to their co-occurrence. RESEARCH DESIGN AND METHODS This population-based cohort study included individuals born in Sweden during 1968–1998, from whom pairs of full siblings, half-siblings, and cousins were identified. Information on diagnoses of early-onset type 2 diabetes and mood (including unipolar depression and bipolar disorder), anxiety, and stress-related disorders was obtained from the National Patient Register. Logistic and Cox regression models were used to assess the phenotypic association and familial coaggregation between type 2 diabetes and psychiatric disorders. Quantitative genetic modeling was conducted in full and maternal half-sibling pairs to estimate the relative contributions of genetic and environmental factors to the association. RESULTS Among a total of 3,061,192 individuals, 7,896 (0.3%) were diagnosed with early-onset type 2 diabetes. These individuals had higher risks of any diagnosis (odds ratio [OR] 3.62 [95% CI 3.44, 3.80]) and specific diagnosis of unipolar depression (3.97 [3.75, 4.22]), bipolar disorder (4.17 [3.68, 4.73]), anxiety (3.76 [3.54, 3.99]), and stress-related disorders (3.35 [3.11, 3.61]). Relatives of individuals with early-onset type 2 diabetes also had higher overall risks of the examined psychiatric disorders (ORs 1.03–1.57). These associations are largely explained by genetic factors (51–78%), with the rest explained by nonshared environmental factors. CONCLUSIONS Our findings highlight the burden of mood, anxiety, and stress-related disorders in early-onset type 2 diabetes and demonstrate that shared familial liability may contribute to their co-occurrence, suggesting that in the future research investigators should aim to identify shared risk factors and ultimately refine preventive and intervention strategies.