Recent years have witnessed an increased prevalence of knee osteoarthritis (KOA) among diabetes mellitus (DM) patients—conditions which might share common risk factors such as obesity and advanced aging. Therefore, we conducted dry-to-wet lab research approaches to assess the correlation of type 1 DM (T1DM) and type 2 DM (T2DM) with KOA among all age and genders of Taiwanese population. The strength of association (odds ratio: OR) was analyzed using a phenome-wide association study portal. Populations of 37,353 T1DM and 1,218,254 T2DM were included. We observed a significant association of KOA with T1DM (OR: 1.40 (1.33–1.47), p< 0.0001) and T2DM (OR: 2.75 (2.72–2.78), p< 0.0001). The association between T1DM and KOA among the obese (OR: 0.99 (0.54–1.67), p = 0.0477) was insignificant compared to the non-obese (OR: 1.40 (1.33–1.48), p < 0.0001). Interestingly, a higher association between T2DM and KOA among non-obese persons (OR: 2.75, (2.72–2.79), p < 0.0001) compared to the obese (OR: 1.71 (1.55–1.89), p < 0.0001) was noted. Further, histopathologic and Western blot studies of diabetic mice knee joints revealed enhanced carboxymethyl lysine (advanced glycation end product), matrix metalloproteinase-1, and reduced cartilage-specific proteins, including type II collagen (Col II), SOX9, and aggrecan (AGN), indicating deteriorated articular cartilage and proteoglycans. Results indicate that DM is strongly associated with KOA, and obesity may not be a confounding factor.