The association between subclinical hypothyroidism (SCH) and microvascular complications of type 2 diabetes is unclear. We examined whether SCH is associated with diabetic retinopathy or nephropathy in Korean patients with type 2 diabetes. Data from 489 patients who visited the diabetes clinic at a university hospital between 2001 and 2007 were analyzed retrospectively. Participants were evaluated for glycemic control, thyroid function, and diabetic retinopathy and nephropathy. Diabetic retinopathy was classified into five grades. Diabetic nephropathy was assessed by the presence of albuminuria. Patients in the SCH group had a higher proportion of women, older age, longer duration of diabetes, higher systolic and diastolic blood pressure, and higher insulin resistance index compared with the euthyroid group. No significant difference in family history of diabetes or body mass index was found between groups. The prevalence of severe diabetic retinopathy (severe nonproliferative diabetic retinopathy or proliferative diabetic retinopathy) was significantly higher in the SCH group than the euthyroid group (32.8% vs. 19.6%, P = 0.036), whereas no between-group difference was found in the prevalence of diabetic nephropathy. After adjustment for potential confounding factors (HbA1c, BMI, duration of diabetes, diabetic nephropathy, and hypertension) by multivariate logistic regression analysis, SCH remained significantly associated with severe diabetic retinopathy (odds ratio 2.086 (95% CI, 1.010-4.307), P = 0.047). These results suggest that SCH was independently associated with severe diabetic retinopathy in patients with type 2 diabetes. Further prospective studies are required to confirm the association between SCH and diabetic retinopathy.