BACKGROUND Nonalcoholic Fatty Liver Disease (NAFLD) is closely associated with type 2 Diabetes Mellitus (DM) and its complications. Several noninvasive diagnostic methods for NAFLD have been formulated recently. Fatty Liver Index (FLI) is one such simple method to obtain and it may help clinicians to screen type 2 DM patients for fatty liver. AIM AND OBJECTIVES 1. To know the frequency of NAFLD by ultrasound examination in type 2 DM patients of Vinayaka Missions Kirupananda Variyar Medical College and Hospital. 2. To evaluate the type 2 DM patients for risk of NAFLD by fatty liver index. MATERIALS AND METHODS A cross-sectional study was conducted on 50 nonalcoholic type 2 DM patients analysing their blood sample for lipid profile, fasting blood glucose, aspartate transaminase, alanine transaminase, gamma-glutamyl transferase levels. All the subjects had liver ultrasound examination and their anthropometric measurements noted. The Fatty Liver Index (FLI) was calculated using body mass index, waist circumference, and serum GGT. STATISTICAL ANALYSIS All the statistical work was performed by the SPSS software. To estimate the differences between patients with and without NAFLD, the Student's t-test was applied. RESULTS Out of the 50 patients, 36% (n=18) had evidence of fatty liver based on the ultrasound examination. The patients with NAFLD had significantly high BMI, cholesterol, triglycerides, GGT, and ALT levels. The variables like fasting glucose, HDL-C, LDL-C, and AST did not significantly vary between the groups. 58% (n=29) of patients had fatty liver based on FLI. The frequency of NAFLD in T2DM patients is higher when using the FLI than the ultrasound examination.