The actual prevalence of diabetic kidney disease (DKD) in patients with type 2 diabetes (T2D) in Malaysia is unknown. We aimed to determine the prevalence of DKD and its associated risk factors among T2D patients in Malaysia. An analytical cross-sectional study was conducted using the year 2022 clinical audit dataset from the National Diabetes Registry. DKD was defined as albuminuria, a decreased glomerular filtration rate, or both. Among 80,360 patients, 62.2% were female, 68.4% were Malay, and the mean age was 61.4 years. A total of 56.7% (95% CI 56.4–57.1%) of patients were found to have DKD. Increasing age, male sex, Malay ethnicity, longer duration of diabetes, overweight, obesity, hypertension, diabetic retinopathy, diabetic foot ulcer, nontraumatic lower-extremity amputation, ischaemic heart disease, stroke, insulin, higher numbers of antihypertensive agents, antiplatelet agents, poorer HbA1c control, higher systolic blood pressure, non-achievement of triglyceride target, and non-attainment of HDL-cholesterol goal were independent risk factors associated with DKD. Clinicians, program managers, and health policymakers should target modifiable factors to manage DKD and prevent its progression to end-stage kidney disease in Malaysia.