OBJECTIVE In cross-sectional U.S. studies, patients with diabetes had twice the prevalence of latent tuberculosis infection (LTBI) compared with those without diabetes. However, whether LTBI contributes to diabetes risk is unknown. We used longitudinal data to determine if LTBI is associated with increased diabetes incidence. RESEARCH DESIGN AND METHODS We conducted a retrospective cohort study among U.S. Veterans receiving care in the Veterans Health Administration from 2000 to 2015. Eligibility included all patients without preexisting diabetes who received a tuberculin skin test (TST) or interferon-γ release assay (IGRA). We excluded patients with a history of active TB and those diagnosed with diabetes before or within 2 years after LTBI testing. Patients were followed until diabetes diagnosis, death, or 2015. LTBI was defined as TST or IGRA positive. Incident diabetes was defined by use of ICD-9 codes in combination with a diabetes drug prescription. RESULTS Among 574,113 eligible patients, 5.3% received both TST/IGRA, 79.1% received TST only, and 15.6% received IGRA only. Overall, 6.6% had LTBI, and there were 2,535,149 person-years (PY) of follow-up after LTBI testing (median 3.2 years). The diabetes incidence rate (per 100,000 PY) was greater in patients with LTBI compared with those without (1,012 vs. 744; hazard ratio [HR] 1.4 [95% CI 1.3–1.4]). Increased diabetes incidence persisted after adjustment for covariates (adjusted HR [aHR] 1.2 [95% CI 1.2–1.3]) compared with those without LTBI. Among patients with LTBI, diabetes incidence was similar in those treated for LTBI compared with those who were not treated (aHR 1.0 [95% CI 0.9–1.1]). CONCLUSIONS Comprehensive longitudinal data indicate that LTBI is associated with increased diabetes incidence. These results have implications for people with LTBI, ∼25% of the global population.