Background: We sought to examine whether type 2 diabetes increases the risk of acute organ dysfunction and of hospital mortality following severe sepsis that requires admission to an intensive care unit (ICU). Methods: Nationwide population-based retrospective cohort study of 16,497 subjects with severe sepsis who had been admitted for the first time to an ICU during the period of 1998-2008. A diabetic cohort (n = 4573) and a non-diabetic cohort (n = 11924) were then created. Relative risk (RR) of organ dysfunctions, length of hospital stay (LOS), 90-days hospital mortality, ICU resource utilization and hazard ratio (HR) of mortality adjusted for age, gender, Charlson-Deyo comorbidity index score, surgical condition and number of acute organ dysfunction, were compared across patients with severe sepsis with or without diabetes. Results: Diabetic patients with sepsis had a higher risk of developing acute kidney injury (RR, 1.54; 95% confidence interval (CI), 1.44-1.63) and were more likely to be undergoing hemodialysis (15.55% vs. 7.24%) in the ICU. However, the diabetic cohort had a lower risk of developing acute respiratory dysfunction (RR = 0.96, 0.94-0.97), hematological dysfunction (RR = 0.70, 0.56-0.89), and hepatic dysfunction (RR = 0.77, 0.63-0.93). In terms of adjusted HR for 90-days hospital mortality, the diabetic patients with severe sepsis did not fare significantly worse when afflicted with cardiovascular, respiratory, hepatic, renal and/or neurologic organ dysfunction and by numbers of organ dysfunction. There was no statistically significant difference in LOS between the two cohorts (median 17 vs. 16 days, interquartile range (IQR) 8-30 days, p = 0.11). Multiple logistic regression analysis to predict the occurrence of mortality shows that being diabetic was not a predictive factor with an odds ratio of 0.972, 95% CI 0.890-1.061, p = 0.5203. Interpretation: This large nationwide population-based cohort study suggests that diabetic patients do not fare worse than non-diabetic patients when suffering from severe sepsis that requires ICU admission.