Difficulties in everyday tasks such as walking and bathing affect 50-80% more people with the disease than those without, researchers found.
They said health services around the world must prepare for an increase in costs from disability as diabetes cases rise.
But the reasons for the link remain unclear.
The meta-analysis, published in The Lancet Diabetes & Endocrinology, highlights the challenges facing the NHS as diabetes cases soar.
The number of people in the UK with a diagnosis of diabetes doubled between 1996 and 2012, from 1.4m to 2.9m. Experts have called the rise an 'epidemic'.
Researchers from Australia compiled data from 26 studies that compared the risk of disability in people with and without all types of diabetes. Most participants were aged over 55.
Diabetes patients had a 51% higher risk of mobility problems. They were 55% more likely to have difficulties operating everyday items such as telephones, and faced a 82% greater risk of problems with daily activities such as bathing or eating.
In absolute terms, one study of 8,344 women aged over 65 found that 10% of those with diabetes had a disability compared with 5% of women without the condition.
Although the cause of the link is unclear, it has been suggested that high blood glucose levels may cause chronic muscle inflammation, leading to physical disability.
Another possibility is that diabetes can cause muscle wasting. Complications such as stroke, heart disease and kidney disease can all cause disability too.
Co-author Dr Anna Peeters of the Baker IDI Heart and Diabetes Institute in Melbourne, Australia said: 'As the world's population ages, and diabetes becomes more common, it seems clear that we will see an increased need for disability-related health resources, which health systems around the world need to be prepared for.'
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