Background : Older adults with type 2 diabetes mellitus (DM) have high incidence of falls. The aim of this study was to compare sensorimotor functions, balance, mobility, fear of falling, and fall history in older people with DM (with and without neuropathy) and non-diabetic healthy controls. Methods : We enrolled 153 participants aged 50–70 years: 51 people with diabetic peripheral neuropathy (D-PN), 52 with diabetes without neuropathy (D-noPN), and 50 healthy controls (HC). Participants completed a fear of falling assessment and detailed test battery comprising sensorimotor functions, lower limb strength, contrast vision, reaction time, balance, and mobility from which a composite physiological fall risk score (PFRS) was derived. In addition, a fall history of the past 3 months was recorded. Results :Post hoc comparisons of ANOVA test revealed the D-PN had significant deficits than the other two groups in tests of lower limb sensation, knee extension strength, reaction time, postural sway, one leg standing, sit-to-stand and the timed up and go test. The D-PN had the highest fear of falling (30.18 ± 6.75) and the highest PFRS (1.68 ± 1.13). PFRS for the D-noPN (0.74 ± 0.80) was intermediate between HC (0.49 ± 0.96) and DP-N groups. Thirty-four D-PN participants (66.7%), 19 D-noPN participants (36.5%), and 7 HC (14.0%) reported one or more falls in the past 3 months (Chi2 test for trend = 28.1, df = 2, p < 0.001). Conclusions : Older people with diabetic neuropathy have impaired sensorimotor function, balance, mobility, and associated increased fear of falling and fall rates. This population may benefit from fall risk assessments involving the above measures, and subsequent interventions targeted to deficits amenable to correction.