Anemia is a common finding in diabetes, particularly in patients with albuminuria or renal impairment. We recently showed that at least 1 in 5 outpatients with type 1 or type 2 diabetes in tertiary clinics have anemia, in whom it constitutes a significant additional burden. Anemia is associated strongly with an increased risk of diabetic complications including nephropathy, retinopathy, and heart failure. Although a number of factors contribute to an increased prevalence of anemia in diabetes, an uncoupling of hemoglobin concentration and renal erythropoietin synthesis associated with tubular dysfunction appears to be the dominant factor. In our patients with diabetes and anemia, more than three quarters had functional erythropoietin deficiency. This association was most pronounced in patients with renal impairment, in whom nearly half of all patients had anemia. However, 70% of anemic patients without renal impairment also had inappropriately low erythropoietin levels. Consequently, the likelihood of functional erythropoietin deficiency, as a cause of anemia in patients with diabetes, is not dependent on the severity of renal impairment. Although there is a clear rationale for correction of anemia in diabetes, it remains to be established whether this will lead to improved outcomes. Some small studies suggest improvement in cardiac outcomes and hospitalization. It is anticipated that large ongoing studies will help define the optimal approach to the management of anemia in diabetes.