Background: Little is known about the prevalence and risk factors of diabetes among Gaza Palestinians, 64% of whom are refugees with exceeded sugar intake. We aimed to estimate the prevalence of type 2 diabetes (T2D) and its association with added sugar intake among residents, with regular visits to primary healthcare centers (PHCs) across Gaza. Methods: From October to December of 2019, a cross-sectional survey was conducted among 1000 citizens and refugees in nine PHCs selected from the five governorates of the Gaza Strip. Information on dietary intake, medical history, and other risk factors was collected by trained health workers, using structured questionnaires. Anthropometry and biochemical data were extracted from the PHC medical record system. Results: Overall, the prevalence of diagnosed T2D and undiagnosed T2D were 45.2% and 16.8%, respectively, in adults aged 42 to 74 years, with the differences among citizens and refugees (diagnosed: 46.2% vs. 43.8%; undiagnosed: 15.7% vs. 18.2%). The uncontrolled glycaemic rate was 41.9% and 36.8% for diagnosed patients in citizens and refugees, respectively. Among those without a clinical diagnosis of T2D, after multivariable adjustment, daily added sugar intake was positively associated with fasting glucose and the risk of undiagnosed T2D (odds ratio, 95% CI, highest vs. lowest intake, was 2.71 (1.12–6.54) (pfor trend < 0.001). In stratified analysis, the associations between added sugar intake and the risk of undiagnosed T2D tend to be stronger among refugees or those with higher body mass index. Conclusions: Among Palestinian adults, both citizens and refugees are affected by T2D. Added sugar intake is associated with the risk of undiagnosed T2D.