We investigated the prevalence of type 2 diabetes (T2DM) and impaired fasting glycemia (IFG) and their risk factors in the urban population of Bangladesh. The study was carried out in Dhaka City Corporation with a population of 99,12,908 in 20,89,336 households distributed in 95 wards. Using a multistage cluster sampling, we investigated 5265 eligible participants of 20 age years and above for height, weight, waist-girth, hip-girth, blood pressure and fasting blood glucose. Body mass index (BMI) and waist-to-hip ratio (WHR) were calculated. We used WHO diagnostic criteria of 1999. The overall prevalence of T2DM was 11.2% and IFG was 5.9%. The age-standardized prevalence of T2DM (95% CI) was 10.5% (9.37-11.13) and IFG was 5.2% (4.51-5.84). Compared with the slum dwellers, the non-slum dwellers had significantly higher prevalence of both T2DM (7.4 vs. 13.4%, p<0.001) and IFG (4.1 vs. 7.4%, p<0.001). Logistic regression analysis showed that family history of diabetes, higher family income, sedentary lifestyle and higher quartiles of age, BMI and WHR were significantly related to diabetes. The prevalence of diabetes in the urban population has increased alarmingly in recent years. Older age, obesity, higher income, family history of diabetes and reduced physical activity were proved to be the significant risk factors for diabetes and IFG.