Abstract Aims The impact of steatotic liver disease (SLD) subtypes on incident type 2 diabetes remains unclear. We investigated the association of metabolic dysfunction‐associated steatotic liver disease (MASLD), MetALD (MASLD with moderate alcohol consumption), and alcohol‐related liver disease (ALD) with incident type 2 diabetes in Korean adults aged 20–39 years. Materials and Methods Using the Korean National Health Insurance Service database, we included 6 250 145 adults aged 20–39 who underwent health examinations between 2009 and 2012. SLD subtypes were classified by fatty liver index and alcohol intake. Incident type 2 diabetes was assessed using Cox proportional hazards models. Results During a median follow‐up of 10.6 years, 72 028 participants developed type 2 diabetes. Incidence rates per 1000 person‐years were higher in MASLD (10.56), MetALD (9.96), and ALD (12.49) than in non‐ SLD (1.29). Multivariable analyses showed significantly increased risks of type 2 diabetes (adjusted hazard ratios [95% CI ]: 2.81 [2.78–2.85] for MASLD , 2.92 [2.87–2.98] for MetALD , and 3.99 [3.88–4.09] for ALD ). Conclusion All SLD subtypes significantly increased the risk of type 2 diabetes in young adults, with the greatest risk in ALD , followed by MetALD and MASLD . Early detection and management of SLD are essential to reduce the future burden of diabetes.