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Background: Risk factors for type 2 diabetes remain poorly characterized among Aboriginal Canadians. We aimed to determine the incidence of type 2 diabetes in an Aboriginal community and to evaluate prospective associations with metabolic syndrome and its components. Methods: Of 606 participants in the Sandy Lake Health and Diabetes Project from 1993 to 1995 who were free of diabetes at baseline, 540 (89.1%) participated in 10-year follow-up assessments. Baseline anthropometry, blood pressure, fasting insulin and serum lipid levels were measured. Fasting and 2-hour postload glucose levels were obtained at follow-up to determine incident cases of type 2 diabetes. Results: The 10-year cumulative incidence of diabetes was 17.5%. High adiposity, dyslipidemia, hyperglycemia, hyperinsulinemia and hypertension at baseline were associated with an increased risk of diabetes after adjustment for age and sex (all p ≤ 0.03). Metabolic syndrome had high specificity (75%–88%) and high negative predictive value (85%–87%) to correctly detect diabetes-free individuals at follow-up. It had low sensitivity (26%–48%) and low positive predictive value (29%–32%) to detect future diabetes. Metabolic syndrome at baseline was associated with incident diabetes after adjustment for age and sex, regardless of whether the syndrome was defined using the National Cholesterol Education Program criteria (odds ratio [OR] 2.03, 95% confidence interval [CI] 1.10–3.75) or the International Diabetes Federation criteria (OR 2.14, 95% CI 1.29–3.55). The association was to the same degree as that for impaired glucose tolerance assessed using the oral glucose tolerance test (OR 2.87, 95% CI 1.52–5.40; p > 0.05 for comparison of C statistics). Interpretation: Metabolic syndrome and its components can be identified with readily available clinical measures. As such, the syndrome may be useful for identifying individuals at risk of type 2 diabetes in remote Aboriginal communities.