Objective: Hip fracture tremendously impacts functional abilities for the elderly with high morbidity and mortality; recovery is compromised by co-morbidities. Diabetes mellitus is a common co-morbidity for the aging population, but little is known about the influence of diabetes on outcomes of the Asian elderly with hip fracture. Research Design and Methods: This study was a secondary analysis of data on 242 community-dwelling elders with hip fracture from three previous longitudinal studies. Sixty-one cases (25.2%) had diabetes. Outcomes were measured by the Chinese Barthel Index, Medical Outcomes Study Short Form-36 Taiwan version, and analyzed by the generalized estimating equation approach to examine how diabetes influenced hip-fractured elders' mortality, service utilization, mobility, daily activities, and health-related quality of life during the first 12 months after postsurgical discharge in Taiwan. Results: Hip-fractured elderly with diabetes had a significantly higher mortality rate (22.6% vs. 10.3%, p = 0.03) during the first year following discharge, and significantly higher readmission rate (10.0% vs. 2.5%, p = 0.04) from the first to third month following discharge than those without diabetes. After controlling for covariates, elderly participants without diabetes had an overall 2.2 times (confidence interval [ CI] = 1.15-4.21) greater odds of recovery in walking ability and better reported general health (beta = 9.33; p = 0.01) and physical functioning (beta = 7.26; p = 0.02) than those with diabetes during the first year after discharge. Conclusions: Diabetes negatively influenced outcomes of elderly patients with hip fracture. The results may provide a reference for developing interventions for hip-fractured elders with diabetes.