Previous reports highlight the role of systemic inflammation in the genesis of non-thyroidal illness syndrome and type 2 diabetes mellitus (T2DM). Our objective was to assess whether body mass index and the low-grade systemic inflammation would be associated with changes in thyroid hormone metabolism in patients with type 2 diabetes. This was a cross-sectional study of 104 subjects; 52 patients with type 2 diabetes and 52 in a control group, paired by age, gender and body mass index. We measured total (T) and free (F) thyroxine (T4) and triiodothyronine (T3), reverse T3 (rT3), the ratios FT3/rT3, FT3/FT4 and FT4/rT3, clinical parameters (age, gender, diabetes duration and complications, body mass index, waist circumference, hypertension, HbA1c), and high sensitivity C-reactive protein. Patients with DM presented lower levels of TT4 (p=0.006), TT3 (p<0.001) and FT3 (p<0.001) and higher of FT4 (p<0.001), waist circumference (p=0.047) and C-reactive protein (p<0.001). Body mass index was inversely correlated with FT4 (p=0.036) and TT3 (p=0.008). C-reactive protein was positively correlated with rT3 (p=0.001) and inversely with FT4/rT3 (p<0.001) and FT3/rT3 (p=0.014). Body mass index was an independent predictor for FT4 (B=-0.011, p=0.029) and TT3 levels (B=-1.118, p=0.003). Inflammation predicted the FT4/rT3 ratio (B=-0.190, p<0.001). C-reactive protein (B=0.235, p<0.001) and body mass index (B=-0.008, p=0.047) were independent predictors for rT3. In conclusion, type 2 diabetes was associated with a low T3 state. Body mass index and the low-grade systemic inflammation are related to the non-thyroidal illness syndrome in these patients, possibly by altering the activity of peripheral deiodinases.