The focus in diabetes care has traditionally been around the optimisation of the glycaemic control and prevention of complications. However, the prevention of frailty and improvement in physical function have now emerged as new targets of diabetes management. This is mainly driven by the significant adverse impact that early onset frailty and decline in physical function have on health outcomes, functional independence, and quality of life in people with type 2 diabetes (T2D). There is an increasing emphasis in the expert consensus and management algorithms to improve physical function in people with T2D, predominantly through lifestyle interventions, including exercise and the control of modifiable risk factors. Trials of novel glucose-lowering therapies (GLTs) also now regularly assess the impact of these novel agents on measures of physical function within their secondary outcomes to understand the impact that these agents have on physical function. However, challenges remain as there is no consensus on the best method of assessing physical function in clinical practice, and the recognition of impaired physical function remains low. In this review, we present the burden of a reduced physical function in people with T2D, outline methods of assessment used in healthcare and research settings, and discuss strategies for improvement in physical function in people with T2D.