OBJECTIVE Topical corticosteroids (CSs) are commonly used to treat inflammatory skin conditions including eczema and psoriasis. Although topical CS package inserts describe hyperglycemia and glycosuria as adverse drug reactions, it is unclear whether topical CS use in real life is also associated with an increased risk of type 2 diabetes (T2D). RESEARCH DESIGN AND METHODS Two matched case-control studies and one cohort study were conducted using routinely collected health care data from Denmark and the U.K. A total of 115,218 and 54,944 adults were identified as case subjects with new-onset T2D in the Danish and U.K. case-control study, respectively. For the Danish cohort study, 2,689,473 adults were included. The main exposure was topical CSs, and the outcome was incident T2D. RESULTS Topical CS was significantly associated with T2D in the Danish (adjusted odds ratio [OR] 1.25 [95% CI 1.23–1.28]) and U.K. (adjusted OR 1.27 [95% CI 1.23–1.31]) case-control studies. Individuals who were exposed to topical CSs had significantly increased risk of incident T2D (adjusted hazard ratio 1.27 [95% CI 1.26–1.29]). We observed significant dose-response relationships between T2D and increasing potency of topical CSs in the two Danish studies. The results were consistent across all sensitivity analyses. CONCLUSIONS We found a positive association between topical CS prescribing and incident T2D in Danish and U.K. adult populations. Clinicians should be cognizant of possible diabetogenic effects of potent topical CSs.