Oxidative stress is a potential biological mediator of the higher rates of psychiatric illness (PI) observed after the onset of type 2 diabetes (T2DM). We investigated validated urinary markers of systemic DNA/RNA damage from oxidation (8-oxodG/8-oxoGuo respectively) as predictors of incident PI in a cohort of 1381 newly diagnosed T2DM patients, who were followed prospectively for a total of 19 years after diagnosis. Psychiatric diagnoses were from Danish national registries. Patients were examined at the time of diagnosis and at a 6-year follow-up. At baseline, 8-oxodG was slightly lower in PI vs. non-PI patients, while at 6-year follow-up, 8-oxoGuo was significantly higher in PI patients. Using Cox proportional hazard models, we found that higher levels of 8-oxodG at 6-year follow-up significantly predicted lower incidence of PI after the adjustment for confounders. In a subgroup analysis, this association was most predominant in minor PIs (unipolar depression and anxiety) compared to major PIs such as schizophrenia and bipolar disorder. These observations indicate that higher levels of systemic oxidative stress are not associated with a higher risk of PI after T2DM onset. Only PI patients treated in hospital care were included in the registries, and the conclusion thus only applies to these individuals.