As an essential element, iron plays a central role in many physiological processes, including redox balance, inflammation, energy metabolism, and environment sensing. Perturbations in iron homeostasis are associated with several conditions, including hyperglycemia and diabetes, both of which have been studied in patients and animal models. To clarify the pleiotropic role of iron homeostasis in diabetes development, the early studies on diseases with iron-overload, studies on clinical iron depletion therapies, associations between iron-related genetic polymorphisms and diabetes, and etiological mechanisms underlying iron perturbations-impaired insulin secretion and insulin sensitivity were carefully reviewed and discussed. Hereditary hemochromatosis, transfusion-dependent thalassemia, and excess heme iron intake can increase the risk of developing diabetes. Genetically modified mice and mice fed a high-iron diet present with discrepant phenotypes due to differences in tissue iron distribution. Moreover, several genetic polymorphisms related to iron homeostasis have been associated with the risk of developing diabetes. Tightly controlled iron metabolism is essential for insulin secretion and insulin sensitivity, and iron overload in pancreatic islets alters reactive oxygen species (ROS) generation, as well as hypoxia-inducible factor-1α (HIF-1α) stability and adenosine triphosphate (ATP) synthesis, thereby impairing the function and viability of β-cells. Decreased levels of adiponectin, macrophage-mediated inflammation, and ROS-mediated liver kinase B1 (LKB1)/adenosine monophosphate-activated protein kinase (AMPK) activation can contribute to iron overload-induced insulin resistance, whereas iron deficiency could also participate in obesity-related inflammation, hypoxia, and insulin resistance. Because iron homeostasis is closely correlated with many metabolic processes, future studies are needed in order to elucidate the finely tuned network among iron homeostasis, carbohydrate and lipid metabolism, inflammation, and hypoxia.