Introduction: Diabetes mellitus has reached pandemic proportion and in 2030, there will be approximately 366 million diabetics; of these 79 million will be from India. Diabetes mellitus is a group of metabolic diseases that includes hyperglycemia resulting from defects in insulin secretion, insulin action or both. Type 2 diabetes is characterized by insulin resistance and insulin deficiency (often relative rather than absolute). Aims and Objectives: To study Assessment of the insulin resistance- insulin sensitivity and β cell function in type 2 diabetes with NAFLD associated with HFE gene mutation. Materials and Methods: The work embodied in this study was conducted at tertiary care Hospital. It is a hospital based case control study. All the type 2 diabetic patients attending the OPD irrespective of their sex and treatment protocol were taken; it includes both old and new cases of type 2 diabetes. All the type 2 diabetic patients were subjected to ultrasonography to rule out the fatty liver. Type 2 DM with NAFLD was taken as cases and Type 2 DM without NAFLD was taken as controls. Biochemical parameters analysed were glucose, insulin, serum iron and total iron binding capacity. DNA was extracted from frozen whole blood to detect Cys282Tyr mutation.Result: In our study population out of 100 type 2 diabetes, 54 patients had fatty liver. The prevalence of fatty liver in our study group was 54%.In our study population, majority of the patients were in the age group of 51- 60 years in both cases and controls. Age distribution between cases and controls were matched (Chi square value 2.45 degree of freedom (df) is 3, p value = 0.48).NAFLD cases had more female patients (59.2%) than controls and it was statistically significant (Chi square value x²= 4.94 and p<0.02). In our study population, mean fasting glucose in cases and controls (147.8 ± 44.6 and 138.5 ± 33.9 respectively) were not significantly different (p<0.5). Whereas post prandial glucose, fasting insulin, HOMA-IR and HOMA-β were significantly(p<0.5) higher in NAFLD patients. In comparison to controls, Insulin sensitivity index (QUICK) was statistically low(p< 0.05) in NAFLD patients. Conclusion: We observed significant increase in fasting insulin, beta-cell function (HOMA-β) and insulin resistance along with decreased insulin sensitivity in NAFLD patients.