Introduction: India is the diabetic capital of the world. Vitamin B12 deficiency has been recognized since many years ago as an important side effect in diabetic patients who take metformin for more than 5-10 years.This research aimed to determine the prevalence of anemia in type 2 diabetes mellitus (T2DM) and its association with vitamin B12 deficiency due to use of Metformin. Materials and Methods: Total 200 type 2 diabetes mellitus (T2DM) males and females were included in the study.Blood collection for Fasting blood glucose and Hba1c levels were measured from all participants in tubes without anticoagulant. Hemoglobin, mean corpuscular volume (MCV) were measured by automated cell counters. Measurement of vitamin B12 level was done only in those patients who presented with Macrocytic anemia. Results: Among 200 patients, 113 patients were on vegetarian. The prevalence of anemia in this study population was 65(32.5%). 11(16.9%) were diagnosed as Normocytic Normochromic anemia, 22 (33.8%) with Microcytic Hypochromic Anemia, 26(40%) with Macrocytic Anemia and 6(9.2%) with Dimorphic anemia. Among these 32 patients, who presented with macrocytic and dimorphic anemia, vitamin B12 levels were measured. For 23 vitamin B 12 level was<200 pg/ml, and for the rest 9 patient's vitamin B12 level was >200 pg/ml. 149 patients were on Metformin. Conclusion: Our findings suggest that correction of anemia may have a significant role in prevention of other diabetic complications, thus we recommend that treatment criteria for diabetes should include routine hematological tests and annual screening of Vitamin B12 deficiency along with supplementation should be adopted while treating T2DM.