Diabetes, especially type 2 diabetes (T2D), poses an unprecedented challenge to global public health. Hydration status also plays a fundamental role in human health, especially in people with T2D, which is often overlooked. This study aimed to explore the longitudinal associations between hydration status and the risk of T2D among the Chinese population. This study used data from the large community-based Kailuan cohort, which included adults who attended physical examinations from 2006 to 2007 and were followed until 2020. A total of 71,526 participants who eventually met the standards were divided into five hydration-status groups based on their levels of urine specific gravity (USG). Multivariable and time-dependent Cox proportional hazards models were employed to evaluate the associations of baseline and time-dependent hydration status with T2D incidence. Restricted cubic splines (RCS) analysis was used to examine the dose–response relationship between hydration status and the risk of T2D. Over a median 12.22-year follow-up time, 11,804 of the participants developed T2D. Compared with the optimal hydration-status group, participants with dehydration and severe dehydration had a significantly increased risk of diabetes, with adjusted hazard ratios (95% CI) of 1.30 (1.04–1.63) and 1.38 (1.10–1.74). Time-dependent analyses further confirmed the adverse effects of impending dehydration, dehydration, and severe dehydration on T2D incidence by 16%, 26%, and 33% compared with the reference group. Inadequate hydration is significantly associated with increased risks of T2D among Chinese adults. Our findings provided new epidemiological evidence and highlighted the potential role of adequate hydration status in the early prevention of T2D development.