Patients with type 2 diabetes mellitus (T2DM) have increased fracture risk despite normal or increased bone mineral density (BMD). Elevations in marrow adipose tissue (MAT) and declines in MAT unsaturation are both associated with increased skeletal fragility. The objective of our study was to characterize the quantity and composition of MAT in adults with morbid obesity and T2DM, and to evaluate determinants of MAT. We studied 21 adults with morbid obesity prior to bariatric surgery, 8 of whom had T2DM. All subjects underwent 1H-MR spectroscopy of the lumbar spine and femur for assessment of MAT and dual-energy x-ray absorptiometry (DXA) and quantitative computed tomography (QCT) of the lumbar spine and hip for assessment of areal BMD (aBMD) and volumetric BMD (vBMD). Visceral (VAT) and subcutaneous adipose tissue (SAT) were quantified by CT at L1-L2. Subjects with T2DM had higher vBMD of the femoral neck and higher total MAT at the lumbar spine and femoral metaphysis compared to non-diabetic controls (p≤0.04). Lipid unsaturation index (UI) was significantly lower at the femoral diaphysis in T2DM (p=0.03). Within the entire cohort, HbA1c was positively associated with MAT (p≤0.03), and age was associated with higher MAT and lower MAT unsaturation (p≤0.05). Lumbar spine vBMD was inversely associated with lumbar spine MAT (p=0.04). There was an inverse association between SAT and diaphyseal MAT (p<0.05) while there were no associations with VAT. Subjects with morbid obesity and T2DM have higher MAT with a lower proportion of unsaturated lipids, despite higher femoral neck vBMD. MAT is positively associated with age and HbA1c, and inversely associated with vBMD, suggesting that MAT may serve as an imaging biomarker of skeletal health and metabolic risk.