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Background No prospective study has investigated the relationship between type 2 diabetes mellitus (T2DM) and the risk of primary liver cancer (PLC) in mainland China, and little is known about the effect of diabetes duration on PLC risk. Design Data from two population-based cohorts (the Shanghai Men's Health Study, SMHS, 2002–2006 and the Shanghai Women's Health Study, SWHS, 1996–2000) were thus used to assess the associations among T2DM, diabetes duration and PLC risk in Chinese population. Results During follow-up through 2009, 344 incident PLC cases were identified among 60 183 men and 73 105 women. T2DM is significantly associated with the increased risk of PLC in both men [hazard ratio (HR) = 1.63, 95% confidence interval (CI) 1.06–2.51] and women (HR = 1.64, 95% CI 1.03–2.61). The highest risk of incident liver cancer was observed in the first 5 years after diabetes diagnosis, and decreased substantially with the prolonged diabetes duration (Ptrend < 0.001). No synergistic interaction in the development of PLC was found between diabetes and other known risk factors. Conclusions T2DM is associated with the increased risk of subsequent liver cancer within 5 years after diagnosis in Chinese population, suggesting that hyperinsulinaemia rather than hyperglycaemia is more likely to be a primary mediator for this association. [ABSTRACT FROM AUTHOR]