Subclinical hypothyroidism (SCH) has been associated with type 2 diabetes mellitus. However, it is unknown whether common complications of type 2 diabetes, such as diabetic nephropathy, are also present with SCH. Here, we investigated the association between SCH and diabetic nephropathy among Japanese patients with type 2 diabetes mellitus. In this multicenter cross-sectional study, we recruited 414 such patients who had no previous history of thyroid disease. Serum thyroid hormone levels and the urinary albumin:creatinine ratio were measured. SCH was defined as an elevated thyroid-stimulating hormone (TSH) level (>4.0 mIU/L), and diabetic nephropathy was defined as urinary albumin/creatinine ratio ≥300 mg/g. The prevalence of SCH was 8.7% (n = 36) among patients with type 2 diabetes mellitus. The SCH group had a higher prevalence of dyslipidemia (p = 0.008) and diabetic nephropathy (p = 0.014) than the euthyroid group. Multivariate analysis identified significant positive associations between diabetic nephropathy and SCH (odds ratio [OR], 3.51; 95% confidence interval [CI], 1.10-10.0; p = 0.034), hypertension (OR, 4.56; 95% CI, 1.69-14.7; p = 0.001), and smoking (OR, 3.02; 95% CI, 1.14-7.91; p = 0.026). SCH may be independently associated with diabetic nephropathy in Japanese patients with type 2 diabetes mellitus.