Aims/hypothesis The aim of this study was to examine whether waist circumference (WC) or WHR improve diabetes prediction beyond body mass index in older men and women, and to define optimal cut-off points. Methods In this prospective study, non-diabetic men (n = 3,519) and women (n = 3,404) aged 60–79 years were followed up for 7 years. There were 169 and 128 incident cases of type 2 diabetes in men and women, respectively. Results BMI, WC and WHR all showed strong associations with incident type 2 diabetes independent of potential confounders. In men, the adjusted relative risks (top vs lowest quartile) were 4.71 (95% CI 2.45–9.03) for BMI, 3.53 (95% CI 1.92–6.48) for WC and 2.76 (95% CI 1.58–4.82) for WHR. For women, the corresponding relative risks were 4.10 (95% CI 2.16–7.79), 12.18 (95% CI 4.83–30.74) and 5.61 (95% CI 2.84–11.09) for BMI, WC and WHR, respectively. Receiver-operating characteristic curve analysis revealed similar associations for BMI and WC in predicting diabetes in men (AUC = 0.726 and 0.713, respectively); WHR was the weakest predictor (AUC = 0.656). In women, WC was a significantly stronger predictor (AUC = 0.780) than either BMI (AUC = 0.733) or WHR (AUC = 0.728; p < 0.01 for both). Inclusion of both WC and BMI did not improve prediction beyond BMI alone in men or WC alone in women. Optimal sensitivity and specificity for the prediction of type 2 diabetes was observed at a WC of 100 cm in men and 92 cm in women. Conclusions/interpretation In older men, BMI and WC yielded similar prediction of risk of type 2 diabetes, whereas WC was clearly a superior predictor in older women.