Aims: To evaluate the impact of an integrated model of care for patients with complex Type 2 diabetes mellitus on potentially preventable hospitalizations. Methods: A prospective controlled trial was conducted comparing a multidisciplinary, community-based, integrated primary–secondary care diabetes service with usual care at a hospital diabetes outpatient clinic. Study and hospital admissions data were linked for the period from 12 months before to 24 months after commencement of the trial. The primary outcome was the number of potentially preventable hospitalizations with diabetes-related principal diagnoses. Length of stay once hospitalized was also reported. Results: Of 327 adult participants, 206 were hospitalized and accounted for 667 admissions during the study period. Compared with the usual care group, patients in the integrated model of care group were nearly half as likely to be hospitalized for a potentially preventable diabetes-related principal diagnosis in the 24 months after study commencement (incidence rate ratio 0.53, 95% CI 0.29, 0.96; P = 0.04). The magnitude of the result remained similar after adjusting for age, sex, education and baseline HbA1c concentration (incidence rate ratio 0.54, 95% CI 0.29, 1.01; P = 0.05).When hospitalized, patients in the integrated care group had a similar length of stay compared with those in the usual care group (median difference -2 days, 95%CI -6.5, 2.3; P = 0.33). Conclusions: Patients receiving the integrated model of care had a reduction in the number of hospitalizations when the principal diagnosis for admission was a diabetes-related complication. Integrated models of care for people with complex diabetes can reduce hospitalizations and help attempts to curtail increasing demand on finite health services.