Epidemiologic observations suggest that exposure to ambient fine particulate matter (PM2.5) is associated with increased risk of chronic kidney disease (CKD) and diabetes, a causal driver of CKD. We evaluated whether diabetes mediates the association between PM2.5 and CKD. A cohort of 2,444,157 United States veterans were followed over a median 8.5 years. Environmental Protection Agency data provided PM2.5 exposure levels. Regression models assessed associations and their proportion mediated. A 10 µg/m3 increase in PM2.5 was associated with increased odds of having a diabetes diagnosis (odds ratio: 1.18, 95% CI: 1.06–1.32), use of diabetes medication (1.22, 1.07–1.39), and increased risk of incident eGFR <60 ml/min/1.73 m2 (hazard ratio:1.20, 95% CI: 1.13–1.29), incident CKD (1.28, 1.18–1.39), ≥30% decline in eGFR (1.23, 1.15–1.33), and end-stage renal disease (ESRD) or ≥50% decline in eGFR (1.17, 1.05–1.30). Diabetes mediated 4.7% (4.3–5.7%) of the association of PM2.5 with incident eGFR <60 ml/min/1.73 m2, 4.8% (4.2–5.8%) with incident CKD, 5.8% (5.0–7.0%) with ≥30% decline in eGFR, and 17.0% (13.1–20.4%) with ESRD or ≥50% decline in eGFR. Diabetes minimally mediated the association between PM2.5 and kidney outcomes. The findings will help inform more accurate estimates of the burden of diabetes and burden of kidney disease attributable to PM2.5 pollution.