Objectives: A growing body of evidence suggests that there is a relationship between impaired lung function and the risk of developing diabetes mellitus (DM). However, it is not known if this reflects a causal effect of lung function on glucose metabolism. To clarify the relationship between lung function and the development of DM, we examined the incidence of newly diagnosed prediabetes (a precursor of DM) among subjects with normal glucose tolerance (NGT) at baseline. Design: Primary analysis of an occupational cohort with both cross-sectional and longitudinal data (follow-up duration mean±SD: 28.4±6.1 months). Setting and participants: Data were analysed from 1058 men in a cross-sectional study and from 560 men with NGT in a longitudinal study. Outcomes and methods: Impaired lung function (per cent predicted value of forced vital capacity (%FVC) or per cent value of forced expiratory volume 1 s/FVC (FEV1/FVC ratio)) in relation to the ratio of prediabetes or DM in a cross-sectional study and development of new prediabetes in a longitudinal study. NGT, prediabetes including impaired glucose tolerance (IGT) and increased fasting glucose (IFG) and DM were diagnosed according to 75 g oral glucose tolerance tests. Measurements and main results: %FVC at baseline, but not FEV1/FVC ratio at baseline, was significantly associated with the incidences of DM and prediabetes. Among prediabetes, IGT but not IFG was associated with %FVC. During follow-up, 102 subjects developed prediabetes among those with NGT. A low %FVC, but not FEV1/FVC ratio, was predictive of an increased risk for development of IGT, but not of IFG. Conclusions: Low lung volume is associated with an increased risk for the development of prediabetes, especially IGT, in Japanese men. Although there is published evidence for an association between chronic obstructive pulmonary disease and DM, prediabetes is not associated with the early stage of COPD.