CONTEXT: The long-term risk of type 2 diabetes in adolescents with nonalcoholic fatty liver disease (NAFLD) is unclear. OBJECTIVE: To assess type 2 diabetes risk among adolescents with NAFLD. DESIGN AND SETTING: A nationwide, population-based study of Israeli adolescents who were examined before military service during 1997-2011 and were followed until December 31, 2016. PARTICIPANTS: A total of 1,025,796 normoglycemic adolescents were included. INTERVENTIONS: Biopsy or radiographic tests were prerequisite for NAFLD diagnosis. Data were linked to the Israeli National Diabetes Registry. MAIN OUTCOME MEASURES: Type 2 diabetes incidence. RESULTS: During a mean follow-up of 13.3 years, 12 of 633 adolescents with NAFLD (1.9%; all with high BMI at baseline) were diagnosed with type 2 diabetes as compared to 2,917 (0.3%) adolescents without NAFLD. The hazard ratio (HR) for type 2 diabetes was 2.59 (95% CI 1.47-4.58) for the NAFLD vs. the non-NAFLD group after adjustment for BMI and socio-demographic confounders. The elevated risk persisted in several sensitivity analyses. These included an analysis of persons without other metabolic comorbidities (adjusted HR 2.75 [95% CI 1.48-5.14]) and of persons with high BMI; and an analysis whose outcome was type 2 diabetes by age 30 years (adjusted HR 2.14 [95% CI 1.02-4.52]). The results remained significant when a sex-, birth year- and BMI-matched control group was the reference (adjusted HR 2.98 [95% CI 1.54-5.74]). CONCLUSIONS: Among normoglycemic adolescents, NAFLD was associated with an increased adjusted risk for type 2 diabetes, which may be apparent before age 30 years.