Background The prevalence of type 2 diabetes mellitus (T2DM) is expected to increase from 7.7% in 2017 to 8.4% in 2045 worldwide. Diabetes complications contribute to morbidity and mortality. To evaluate whether the diabetes complications severity index (DCSI) was associated with increased risks of mortality and hospitalization. Methods A retrospective cohort study was conducted using the National Health Insurance Database (NHID) sample cohort of 1,102,047 patients (2002–2015) in Korea. Diabetes complications were evaluated at 2 years after the new diagnosis of T2DM and during the follow-up period. The type and severity of complications were evaluated on the basis of the International Classification of Disease ninth (ICD-9) codes used in DCSI with 7 categories and 55 subcategories of complications. The Cox proportional hazard and Poisson regression models were used to evaluate the mortality and hospitalization rates. The incidence and relative risk of diabetes complications as well as the risk of mortality and hospitalization were the main outcome measures. Results A total of 27,871 patients were finally included and grouped into patients by the number of diabetic complications: none, one, and two or more. Out of total patients, 2,302 (8.26%) died during the follow-up period. Patients died in 490 (5.37%) of 9,130 with none, 659 (7.31%) of 9,015 with one, and 1,153 (11.85%) of 9,726 patients with two or more complications. The risks of mortality and hospitalization were related with DCSI linear [hazard ratio 1.13 (95% CI 1.11–1.16), relative risk 1.04 (95% CI 1.03–1.06)]. Conclusions The higher incidence and severity of diabetes complications have increased risks of mortality and hospitalization in patients with T2DM.