OBJECTIVE Obesity and type 2 diabetes are associated with serious adverse health effects, including cancer. Although bariatric surgery has been shown to reduce cancer risk in patients with obesity, the effect of bariatric surgery on cancer risk in patients with obesity and diabetes is less studied. We therefore examined the long-term incidence of cancer after bariatric surgery and usual care in patients with obesity and diabetes in the matched prospective Swedish Obese Subjects (SOS) study. RESEARCH DESIGN AND METHODS The SOS study examines long-term outcomes following bariatric surgery or usual care. The current analysis includes 701 patients with obesity and type 2 diabetes at baseline, 393 of whom underwent bariatric surgery and 308 who received conventional obesity treatment. Information on cancer events was obtained from the Swedish National Cancer Register. Median follow-up time was 21.3 years (interquartile range 17.6–24.8 years, maximum 30.7 years). RESULTS During follow-up, the incidence rate for first-time cancer was 9.1 per 1,000 person-years (95% CI 7.2–11.5) in patients with obesity and diabetes treated with bariatric surgery and 14.1 per 1,000 person-years (95% CI 11.2–17.7) in patients treated with usual obesity care (adjusted hazard ratio 0.63 [95% CI 0.44–0.89], P = 0.008). Moreover, surgery was associated with reduced cancer incidence in women (0.58 [0.38–0.90], P = 0.016), although the sex-treatment interaction was nonsignificant (P = 0.630). In addition, diabetes remission at the 10-year follow-up was associated with reduced cancer incidence (0.40 [0.22–0.74], P = 0.003). CONCLUSIONS These results suggest that bariatric surgery prevents cancer in patients with obesity and diabetes and that durable diabetes remission is associated with reduced cancer risk.