Type 2 diabetes mellitus (T2DM) is an emerging global health problem in Nepal. However, there is still a paucity of information on its burden and its risk factors among service users from a hospital based setting. This is a cross sectional study conducted among the service users of diabetes clinic in Tribhuvan University Teaching Hospital of Nepal. A sample size of 154 was selected systematically from the patient registration from 30th July to 16th August, 2013. Of the 154 participants, 42.85 % had T2DM. Higher mean body mass index (26.50 ± 5.05 kg/m(2)) and waist circumference (92.47 ± 11.30 cm) was found among the individuals with T2DM and, compared to those without diabetes (Body mass index 25.13 ± 4.28 kg/m(2): waist circumference 88.91 ± 12.30 cm) (P = 0.013). In further analysis, the sedentary occupation (aOR 3.088; 95 % CI 1.427-6.682), measure of high waist circumference (aOR 2.758; 95 % CI 1.238-6.265) individuals from lower socioeconomic status (aOR 3.989; 95 % CI 1.636-9.729) right knowledge on symptoms of diabetes (aOR 3.670; 95 % CI 1.571-8.577) and right knowledge on prevention of diabetes (aOR 3.397; 95 % CI 1.377-8.383) were significantly associated with T2DM status. The current findings suggest that health programs targeting T2DM should focus increasing awareness on harmful health effects of sedentary occupation, symptoms of T2DM and its prevention among the urban population.