Increasing evidence suggests that certain types of cancers are more common in people with diabetes mellitus (DM). This study aimed to investigate the risk of skin cancer in patients with DM in Taiwan. In this retrospective cohort study using data from the Taiwan Longitudinal Health Insurance Research Database, the risk of developing overall skin cancer, including nonmelanoma skin cancer (NMSC) and melanoma, was compared by Poisson regression analysis and Cox regression analysis between the DM and non-DM cohorts. The DM cohort with newly diagnosed DM (n = 41,898) and a non-DM cohort were one-to-one matched by age, sex, index date, and comorbidities (coronary artery disease, hyperlipidemia, hypertension, chronic kidney disease, chronic obstructive pulmonary disease, and obesity). Compared with non-DM cohort statistically, for the people with DM aged ≥60 years, the incidence rates of overall skin cancer and NMSC were significantly higher (overall: DM/non-DM: number [n] = 99/76, incidence rate ratio [IRR] = 1.44, P = 0.02; NMSC: DM/non-DM: n = 94/66, IRR = 1.57, P = 0.005). By Cox regression analysis, the risk of developing overall skin cancer or NMSC was significantly higher after adjusting for sex, comorbidities, and overall diseases with immunosuppression status (overall: adjusted hazard ratio [AHR] = 1.46, P = 0.01; NMSC: AHR = 1.6, P = 0.003). Other significant risk factors were older males for skin cancer (overall: AHR = 1.68, P = 0.001; NMSC: AHR = 1.59, P = 0.004; melanoma: AHR = 3.25, P = 0.04), chronic obstructive pulmonary disease for NMSC (AHR = 1.44, P = 0.04), and coronary artery disease for melanoma (AHR = 4.22, P = 0.01). The risk of developing melanoma was lower in the DM cohort than in the non-DM cohort, but without significance (AHR = 0.56, P = 0.28; DM/non-DM: n = 5/10). The incidence rate and risk of developing overall skin cancer, including NMSC, was significantly higher in older adults with DM. Other significant risk factors for older adults with DM were males for NMSC and melanoma, chronic obstructive pulmonary disease for NMSC, and coronary artery disease for melanoma.