Background: Liver function tests might predict the risk of type 2 diabetes. An independent study evaluating utility of these markers compared with an existing prediction model is yet lacking. Methods and Findings: We performed a case-cohort study, including random subcohort (6.5%) from 38,379 participants with 924 incident diabetes cases (the Dutch contribution to the European Prospective Investigation Into Cancer and Nutrition, EPIC-NL, the Netherlands), and another population-based cohort study including 7,952 participants with 503 incident cases (the Prevention of Renal and Vascular End-stage Disease, PREVEND, Groningen, the Netherlands). We examined predictive value of combination of the Liver function tests (gamma-glutamyltransferase, alanine aminotransferase, aspartate aminotransferase and albumin) above validated models for 7.5-year risk of diabetes (the Cooperative Health Research in the Region of Augsburg, the KORA study). Basic model includes age, sex, BMI, smoking, hypertension and parental diabetes. Clinical models additionally include glucose and uric acid (model1) and HbA1c (model2). In both studies, addition of Liver function tests to the basic model improved the prediction (C-statistic by~0.020; NRI by~9.0%; P<0.001). In the EPIC-NL case-cohort study, addition to clinical model1 resulted in statistically significant improvement in the overall population (C-statistic = +0.009; P<0.001; NRI = 8.8%; P<0.001), while addition to clinical model 2 yielded marginal improvement limited to men (C-statistic = +0.007; P = 0.06; NRI = 3.3%; P = 0.04). In the PREVEND cohort study, addition to clinical model 1 resulted in significant improvement in the overall population (C-statistic change = 0.008; P = 0.003; NRI = 3.6%; P = 0.03), with largest improvement in men (C-statistic change = 0.013; P = 0.01; NRI = 5.4%; P = 0.04). In PREVEND, improvement compared to clinical model 2 could not be tested because of lack of HbA1c data. Conclusions: Liver function tests modestly improve prediction for medium-term risk of incident diabetes above basic and extended clinical prediction models, only if no HbA1c is incorporated. If data on HbA1c are available, Liver function tests have little incremental predictive value, although a small benefit may be present in men.