OBJECTIVE—To estimate all-cause hospitalizations, nursing home admissions, and deaths attributable to diabetes using a new methodology based on longitudinal data for a representative sample of older U.S. adults. RESEARCH DESIGN AND METHODS—A simulation model, based on data from the National Health and Nutrition Examination Survey (NHANES) I Epidemiologic Followup Study, was used to represent the natural history of diabetes and control for a variety of baseline risk factors. The model was applied to 6,265 NHANES III adults aged 45–74 years. The prevalence of risk factors in NHANES III, fielded in 1988–1994, better represents today’s adults. RESULTS—For all NHANES III adults aged 45–74 years, a diagnosis of diabetes accounted for 8.6% of hospitalizations, 12.3% of nursing home admissions, and 10.3% of deaths in 1988–1994. For people with diabetes, diabetes alone was responsible for 43.4% of hospitalizations, 52.1% of nursing home admissions, and 47% of deaths. Adjusting for related cardiovascular conditions, which may provide more accurate estimates of attributable risks for people with diabetes, increased these estimates to 51.4, 57.1, and 56.8%, respectively. CONCLUSIONS—Risks of institutionalization and death attributable to diabetes are large. Efforts to translate recent trials of primary prevention into practice and continued efforts to prevent complications of diabetes could have a substantial impact on hospitalizations, nursing home admissions, and deaths and their societal costs.