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OBJECTIVE To examine whether serum 25-hydroxyvitamin D (25OHD) and dietary calcium predict incident type 2 diabetes and insulin sensitivity. RESEARCH DESIGN AND METHODS A total of 6,537 of the 11,247 adults evaluated in 1999–2000 in the Australian Diabetes, Obesity and Lifestyle (AusDiab) study, returned for oral glucose tolerance test (OGTT) in 2004–2005. We studied those without diabetes who had complete data at baseline (n = 5,200; mean age 51 years; 55% were women; 92% were Europids). Serum 25OHD and energy-adjusted calcium intake (food frequency questionnaire) were assessed at baseline. Logistic regression was used to evaluate associations between serum 25OHD and dietary calcium on 5-year incidence of diabetes (diagnosed by OGTT) and insulin sensitivity (homeostasis model assessment of insulin sensitivity [HOMA-S]), adjusted for multiple potential confounders, including fasting plasma glucose (FPG). RESULTS During the 5-year follow-up, 199 incident cases of diabetes were diagnosed. Those who developed diabetes had lower serum 25OHD (mean 58 vs. 65 nmol/L; P < 0.001) and calcium intake (mean 881 vs. 923 mg/day; P = 0.03) compared with those who remained free of diabetes. Each 25 nmol/L increment in serum 25OHD was associated with a 24% reduced risk of diabetes (odds ratio 0.76 [95% CI 0.63–0.92]) after adjusting for age, waist circumference, ethnicity, season, latitude, smoking, physical activity, family history of diabetes, dietary magnesium, hypertension, serum triglycerides, and FPG. Dietary calcium intake was not associated with reduced diabetes risk. Only serum 25OHD was positively and independently associated with HOMA-S at 5 years. CONCLUSIONS Higher serum 25OHD levels, but not higher dietary calcium, were associated with a significantly reduced risk of diabetes in Australian adult men and women.