This study explores the impact of diabetes on employment in Mexico using data from the Mexican Family Life Survey (MxFLS) (2005), taking into account the possible endogeneity of diabetes via an instrumental variable estimation strategy. We find that diabetes significantly decreases employment probabilities for men by about 10 percentage points (p<0.01) and somewhat less so for women — 4.5 percentage points (p<0.1) — without any indication of diabetes being endogenous. Further analysis shows that diabetes mainly affects the employment probabilities of men and women above the age of 44 and also has stronger effects on the poor than on the rich, particularly for men. We also find some indication for more adverse effects of diabetes on those in the large informal labour market compared to those in formal employment. Our results highlight — for the first time — the detrimental employment impact of diabetes in a developing country.