The objective of this study was to evaluate prescribing pattern and potential drug-drug interaction in hospitalized patients with type 2 diabetes mellitus. A prospective, observational study was carried out at inpatient department of SRM medical college hospital and research centre kanchipuram district, Tamilnadu, India from July 2010 to February 2011. The demographic, disease and treatment data of patients with type 2 diabetes mellitus were collected in a specially designed proforma. Data of 142 patients were collected and analyzed, of which 69 (48.6 %) were males and 73 (51.4 %) were females. Mean ± SD of drugs per prescription was 6.1±2.3. 63.57% of the drugs were prescribed by their brand names. 45% of the drugs prescribed were from the WHO list of essential drugs. In type 2 diabetes mellitus metformin and human insulin were most frequently prescribed drugs. Monotherapy was used for 58.9% patients and 41.1% patients were prescribed with combination therapy. 65 potential drug-drug interaction were screened in 53 prescriptions, in which 3(4.6%) were major and 27(41.5%) were moderate level of severity identified. The potential drug-drug interactions found in type 2 diabetes mellitus prescriptions were often involved with medications used to treat co morbid illnesses. The potential drug-drug interactions are frequent in type 2 diabetes mellitus and hence deserve clinical attention. Implementation of an alert guidelines and a computer based screening would help to recognize and prevent potentially dangerous drug-drug interactions.