BACKGROUND Indigenous Australians experience disproportionately high prevalence of, and morbidity and mortality from diabetes. There is an urgent need to understand how Indigenous primary care systems are organised to deliver diabetes services to those most in need, to monitor the quality of diabetes care received by Indigenous people, and to improve systems for better diabetes care. METHODS The intervention featured two annual cycles of assessment, feedback workshops, action planning, and implementation of system changes in 12 Indigenous community health centres. Assessment included a structured review of health service systems and audit of clinical records. Main process of care measures included adherence to guideline-scheduled services and medication adjustment. Main patient outcome measures were HbA1c, blood pressure and total cholesterol levels. RESULTS There was good engagement of health centre staff, with significant improvements in system development over the study period. Adherence to guideline-scheduled processes improved, including increases in 6 monthly testing of HbA1c from 41% to 74% (Risk ratio 1.93, 95% CI 1.71-2.10), 3 monthly checking of blood pressure from 63% to 76% (1.27, 1.13-1.37), annual testing of total cholesterol from 56% to 74% (1.36, 1.20-1.49), biennial eye checking by a ophthalmologist from 34% to 54% (1.68, 1.39-1.95), and 3 monthly feet checking from 20% to 58% (3.01, 2.52-3.47). Medication adjustment rates following identification of elevated HbA1c and blood pressure were low, increasing from 10% to 24%, and from 13% to 21% respectively at year 1 audit. However, improvements in medication adjustment were not maintained at the year 2 follow-up. Mean HbA1c value improved from 9.3 to 8.9% (mean difference -0.4%, 95% CI -0.7;-0.1), but there was no improvement in blood pressure or cholesterol control. CONCLUSIONS This quality improvement (QI) intervention has proved to be highly acceptable in the Indigenous Australian primary care setting and has been associated with significant improvements in systems and processes of care and some intermediate outcomes. However, improvements appear to be limited by inadequate attention to abnormal clinical findings and medication management. Greater improvement in intermediate outcomes may be achieved by specifically addressing system barriers to therapy intensification through more effective engagement of medical staff in QI activities and/or greater use of nurse-practitioners.