This study examines the association between oral antihyperglycemic medication nonadherence and subsequent hospitalization among individuals with type 2 diabetes. Using administrative claims data (2000-2001) from a managed care organization in the Midwestern U.S., this study analyzed 900 enrollees, aged 18 years and over, with type 2 diabetes who were taking oral antihyperglycemic agents both years but who did not use insulin. Nonadherence was defined as a medication possession ratio (MPR) <80%. Multivariate logistic regression analyses were performed where hospitalization in 2001 was regressed on nonadherence to the oral antihyperglycemic drug regimen in 2000, while controlling for nonadherence to drugs for hypertension and dyslipidemia and for hospitalization in 2000, age, sex, intensity of the diabetes drug regimen, and comorbidities. The proportion of enrollees who were nonadherent to the antihyperglycemic drug regimen in 2001 was 28.9%, whereas 18.8 and 26.9% were nonadherent to antihypertensive and lipid-modifying drugs, respectively. The increase in the hospitalization rate for 2001 was most apparent where the antihyperglycemic MPR for 2000 dropped to <80%. Enrollees who were nonadherent to oral diabetes medications in 2000 were at higher risk of hospitalization in 2001 (odds ratio 2.53; 95% CI 1.38-4.64), whereas nonadherence to drugs for hypertension and dyslipidemia were not significantly associated with hospitalization. Patients with type 2 diabetes who do not obtain at least 80% of their oral antihyperglycemic medications across 1 year are at a higher risk of hospitalization in the following year.