Substantial evidence suggests that people with type 2 diabetes have an increased risk of developing several types of cancers. These associations may be due to a number of direct and indirect mechanisms. Observational studies of these associations, including the potential role for glucose-lowering therapy, are being increasingly reported, but face a number of methodological challenges. This paper is the first of two review papers addressing methodological aspects underpinning the interpretations of links between diabetes and cancer, and suggests potential approaches to study designs to be considered in observational studies. This paper reviews factors related to cancer incidence in the diabetic population; the second paper relates to studies of cancer mortality.