Background: Recent evidence suggests that falls are a major complication of diabetes in elderly patients, leading to disability and preventable death. However, the potential risk factors leading to falls in patients with type 2 diabetes are not fully understood. This study was designed to explore the characteristics of vestibular dysfunction and balance control in patients with type 2 diabetes and to analyse the risk factors associated with falls. Methods: The study recruited 51 patients with type 2 diabetes and 43 controls who underwent vestibular function tests and balance control capability tests between January 2013 and December 2015. Vestibular function and balance control capability assessment was based on slow-phase velocity, canal paresis, Sensory Organisation Test (SOT) score, Limits of Stability Test (LOS) score, and Motor Control Test (MCT) score. Results: In all, 56.7% of the diabetic patients had vestibular dysfunction, compared with 27.9% of the controls (p = 0.005). Vestibular dysfunction was dependent on the duration of the disease and serum HbA levels. There were no significant differences between the two groups with respect to the balance test results for SOT score, somatosensory subtest score, vestibular subtest score, or LOS score. However, the visual system and MCT scores were significantly lower in the diabetic patients than in the controls (p = 0.032 and p = 0.018, respectively). Conclusions: Patients with type 2 diabetes have a higher incidence of vestibular dysfunction. Vestibular dysfunction, visual system impairment, and a decline in motion control may be the risk factors that can lead to falls, and thus need to be managed accordingly in diabetic patients.