Type 2 diabetes mellitus (T2DM) is associated with a high rate of comorbidity, including osteoporosis and peptic ulcers. Proton pump inhibitors (PPIs) are a group of acid-suppressing drugs commonly used for treating peptic ulcers. However, observational studies have reported an association between PPI therapy and osteoporotic fractures. This study investigated the association between PPI use and hip fracture (HFx) among patients with T2DM. We conducted this population-based propensity-matched retrospective cohort study using the National Health Insurance Research Database in Taiwan. Patients newly diagnosed with T2DM between 2000 and 2008 were identified. After excluding those who previously used PPIs or suffered HFx, 398,885 patients were recruited (44,341 PPI users; 354,544 non-users). HFx risk data from 2000 to 2013 were collected to calculate the cumulative rate of HFx in these two groups. Sensitivity analyses were conducted to evaluate the effects of PPI dose. After propensity score matching of 1:4, 44,431 and 177,364 patients were assigned to the PPI user and non-user groups, respectively. PPI user group showed an increased risk of HFx with an adjusted hazard ratio of 1.41 (95% CI 1.29-1.54) without dose-response relationship. Thus, there is an increased risk of HFx in patients with T2DM receiving long-term PPI treatment.