OBJECTIVE Insulin has mitogenic effects, although hyperglycemia may be a risk factor for cancer in type 2 diabetes. It remains uncertain whether use of insulin increases cancer risk because of its effect on cell growth and proliferation or decreases cancer risk because of its glucose-lowering effect. RESEARCH DESIGN AND METHODS A 1:2-matched new insulin user cohort on age (+/-3 years), smoking status, and likelihood of initiating insulin therapy (+/-0.05) was selected from a cohort of 4,623 Chinese patients with type 2 diabetes, free of cancer, and naive to insulin at enrollment. Stratified Cox regression analysis on the matched pairs was used to obtain hazard ratios (HRs) of insulin therapy and A1C for cancer risk. A structured adjustment scheme was used to adjust for covariates. RESULTS Of 973 new insulin users, 971 had matched nonusers (n = 1935). The cancer incidence in insulin nonusers was much higher than that in insulin users (49.2 vs. 10.2, per 1,000 person-years, P < 0.0001). After further adjustment for all other covariates with a P value less than 0.3 and nonlinear associations with cancer, A1C was associated with an increased cancer risk (HR per percentage 1.26, 95% CI 1.03-1.55), whereas use of insulin was associated with a decreased cancer risk (HR of insulin users vs. nonusers: 0.17, 0.09-0.32). Consistent results were found in analyses including all 973 insulin users and 3,650 nonusers. CONCLUSIONS In Chinese patients with type 2 diabetes, hyperglycemia predicts cancer, whereas insulin usage was associated with a reduced cancer risk.