Type 2 diabetes is a major health problem in individuals with schizophrenia. The genetic basis of diabetes risk in individuals with schizophrenia has not been previously defined. We measured polymorphisms in a human endogenous retrovirus, Herv K-18, which is located in the CD48 signaling lymphocyte activating (SLAM) gene on chromosome 1. The study population consisted of 229 individuals with schizophrenia, 29 of whom had a history of type 2 diabetes, as well as 136 control individuals without a history of a psychiatric disorder or type 2 diabetes. We found that a haplotype defined by 2 polymorphisms in the envelope region of Herv K-18 is highly associated with type 2 diabetes in a population of 229 individuals with schizophrenia, with an odds ratio of 9.0 (95% confidence limits 2.3-34.7, p<.001) adjusted for race, gender and type of antipsychotic medication. Lower levels of association were found in other polymorphisms located in the 3'untranslated region of Herv K-18 and in adjacent loci in CD48. Polymorphisms in endogenous retroviruses which are located near immunomodulatory genes may constitute risk factors for diabetes in individuals with schizophrenia.