Although diabetes mellitus (DM) has been established as a risk factor for developing atrial fibrillation (AF) and is a known risk factor for stroke, it is unclear whether the presence or duration of DM is the primary adverse influence on the clinical course of AF. We retrospectively analyzed patients diagnosed with incident AF to examine the impact of DM on ischemic stroke and all-cause mortality. The diagnosis of DM was established by ICD-9 codes and review of medical records. To account for the significant differences in baseline characteristics of patients with and without diabetes, we matched 909 AF patients with DM with 909 AF patients without DM using propensity score matching based on 26 baseline variables. Cox regression analysis was used to identify independent factors associated with ischemic stroke and mortality. The mean age of the propensity matched cohort was 74 ± 11.5 years and 55.4% were male. Over a median follow-up period of 5.4 years (maximum 23.9 years), cumulative survival was significantly lower for patients with DM than those without DM; Log-rank p <0.001. In the propensity-matched comparison, the risk of mortality was significantly higher in the DM group compared with the non-DM group (hazard ratio 1.25; 95% confidence interval 1.12 to 1.69; p <0.001). Likewise, patients with DM had a higher risk of stroke (hazard ratio 1.32; 95% confidence interval 1.02 to 1.69; p = 0.03). Duration of DM was not associated with increased risk for stroke or mortality. In conclusion, the co-morbidity of DM represents an independent predictor of reduced survival and further highlights the excess risk of thromboembolism in patients with AF.