Introduction: Subclinical hypothyroidism is relatively common in patients with type 2 diabetes mellitus. Aim: The aim of this work was to examine a possible association between subclinical hypothyroidism and microvascular complication in type 2 diabetic patients. Methods: A total of 100 type 2 diabetic Egyptian patients were randomly selected from our outpatient clinic and screened for thyroid function, microvascular and macrovascular complications. The patients were subsequently divided into two groups: subclinical hypothyroidism group (TSH≥3.5 μU/ml, n=12), and euthyroid group(TSH<3.5 μU/ml, n=88). Results: SCH group had a higher incidence of stroke (8.3%) compared with the euthyroid group (5.7%). SCH group had a higher incidence of retinopathy (25.0%) compared with the euthyroid group (8.3%). As regards diabetic nephropathy, albuminuria was higher in the euthyroid group (mean 79.30) versus SCH group (mean 55.67). Creatinine levels were significantly higher in the SCH group (mean 0.98) than the euthyroid group (mean 0.65) p-value 0.004. This means that SCH may be an important factor in progression of renal disease. Conclusions: The incidence of SCH in type 2 diabetic patients in our sample was 12%. This subgroup of patients had a higher incidence of cerebrovascular stroke and retinopathy. They also have high creatinine levels and thus higher risk for progression of diabetic nephropathy. This data highlights the importance of thyroxine replacement for even the smallest degrees of TSH elevation in patients with type 2 diabetes mellitus.