Non-alcoholic fatty liver disease (NAFLD) is likely to be associated with elevated plasma branched-chain amino acids (BCAAs) and may precede the development of type 2 diabetes (T2D). We hypothesized that BCAAs may be involved in the pathogenesis of T2D attributable to NAFLD and determined the extent to which plasma BCAAs influence T2D development in NAFLD. We evaluated cross-sectional associations of NAFLD with fasting plasma BCAAs (nuclear magnetic resonance spectroscopy), and prospectively determined the extent to which the influence of NAFLD on incident T2D is attributable to BCAA elevations. In the current study, 5791 Prevention of REnal and Vascular ENd-stage Disease (PREVEND) cohort participants without T2D at baseline were included. Elevated fatty liver index (FLI) ≥60, an algorithm based on triglycerides, gamma-glutamyltransferase, body mass index (BMI) and waist circumference, was used as proxy of NAFLD. Elevated FLI ≥ 60 was present in 1671 (28.9%) participants. Cross-sectionally, BCAAs were positively associated with FLI ≥ 60 (β = 0.208, p < 0.001). During a median follow-up of 7.3 years, 276 participants developed T2D, of which 194 (70.2%) had an FLI ≥ 60 (log-rank test, p < 0.001). Cox regression analyses revealed that both FLI ≥60 (hazard ratio (HR) 3.46, 95% CI 2.45⁻4.87, p < 0.001) and higher BCAA levels (HR 1.19, 95% CI 1.03⁻1.37, p = 0.01) were positively associated with incident T2D. Mediation analysis showed that the association of FLI with incident T2D was in part attributable to elevated BCAAs (proportion mediated 19.6%). In conclusion, both elevated FLI and elevated plasma BCAA levels are associated with risk of incident T2D. The association of NAFLD with T2D development seems partly mediated by elevated BCAAs.