Depression is a common feature in patients with type 2 diabetes and often remains undetected and untreated, causing increased morbidity and mortality. We explored the prevalence of co-morbid depression and its associated factors, including major life-events among patients with type 2 diabetes in Bangladesh. We conducted a cross-sectional study among 515 patients with type 2 diabetes between September 2013 and July 2014 in a tertiary hospital in Dhaka city. We assessed depression using Patient Health Questionnaire-9 (PHQ-9) with predefined cut-off scores of 5, 10, 15 and 20 to indicate minimal, mild, moderate, moderately-severe, and severe depression. Associations between depression and its associated factors were explored using univariate and multivariate regression. Overall, 61.9% participants had depressive symptoms, and the prevalence was higher among females (70.9%) compared to males (50.6%). One-third (35.7%) of participants had mild depression and 36.2% had moderate to severe depression. In the multivariate analysis, factors significantly associated with depression were: age≤60 years (OR: 2.1, 95% CI=1.2-3.6; p≤0.006), female gender (OR=1.9, 95% CI=1.3-3.0; p≤0.002), those having 1-3 complications (OR=2.3, 95% CI=1.2-4.3; p=0.010), experienced loss of business or crop failure (OR=2.1, 95% CI=1.2-3.6; p=0.006), major family conflicts (OR=2.2, 95% CI=1.4-3.5; p≤0.001), separation or deaths of family members or divorce (OR=2.2, 95% CI=1.4-3.5; p≤0.001), and those who experienced unavailability of food or medicines (OR=2.2, 95% CI=1.0-4.5; p=0.038). Patients with diabetes, especially females, those having other complications, and major life-events should routinely be screened for symptoms of depression with adequate management of these conditions.