Characteristics of the built environment, including access to unhealthy food outlets, are hypothesized to contribute to type 2 diabetes mellitus (T2D). Swedish nationwide registry data on 4,718,583 adults aged 35–80 years living in 9,353 neighborhoods, each with at least 1 food outlet, were geocoded and linked to commercial registers (e.g., restaurants and grocery stores). Multilevel logistic regression was used to examine the prospective relationship between characteristics of the food environment and T2D from 2005 to 2010. Relative access to health-harming food outlets was associated with greater likelihood of both prevalent and incident T2D in a curvilinear manner, with the highest risk being observed for environments in which one-third of outlets were health-harming. Relative to individuals whose food environment did not change, those who moved into areas with more health-harming food outlets had higher odds of developing T2D (odds ratio = 3.67, 95% confidence interval: 2.14, 6.30). Among those who did not move, living in an area that gained relative access to health-harming food outlets was also associated with higher odds of T2D (odds ratio = 1.72, 95% confidence interval: 1.27, 2.33). These results suggest that local food environment, including changes that result in greater access to unhealthy food outlets, is associated with T2D.