It has not yet been reported whether Type II diabetes mellitus (DM) is associated with an increased cholangiocarcinoma (CC) risk in patients with biliary tract diseases. We identified 123,050 patients concomitantly diagnosed with biliary tract diseases and DM between 1998 and 2010. The control cohort consisted of 122,721 individuals with biliary tract diseases but not DM. Both cohorts were followed-up until the end of 2010 to estimate the risk of CC. We also compared the risk of CC between DM and non-DM cohorts without biliary tract diseases. Overall, the incidence of CC was 21% lower among the DM patients than among the control patients (1.11 vs. 1.41 per 1,000 person-years). DM cohorts exhibited significantly reduced risks for both intrahepatic and extrahepatic CC. A multivariable Cox proportional hazards regression model was used, and the adjusted hazard ratio (HR) of CC was 0.74 (95% confidence interval [CI], 0.66-0.82) for the DM cohort in comparison with the control cohort. The age-specific data indicated that compared with the control patients, the adjusted HRs for the DM patients were significantly lower among patients 50-64 (adjusted HR = 0.67; 95% CI = 0.55-0.82) and 65-74 years old (adjusted HR = 0.70; 95% CI, 0.59-0.84). Furthermore, DM was associated with a lower risk of CC among patients with biliary diseases, regardless of the presence of comorbidities and the status of cholecystectomy. In the patients without biliary tract diseases, DM is associated with significantly increased risk of CC (adjusted HR = 1.58; 95% CI, 1.37-1.82).