Diabetic osteoporosis (DOP), as a metabolic bone disease, leads to an increased risk of fracture in patients and imposes a huge burden on society and individuals. The microenvironment of type two diabetes mellitus (T2DM) may contribute to osteoporosis by triggering cell death in bone tissue. Ferroptosis is a novel type of regulated cell death driven by iron-dependent lipid peroxidation discovered in recent years, and the main molecular mechanism involves dysregulation of iron homeostasis, mitochondrial dysfunction, impaired antioxidant capacity, and accumulation of lipid peroxides. In recent years, there has been increasing evidence that ferroptosis is involved in the pathophysiologic process of DOP. However, its exact role and potential molecular mechanisms have not been fully elucidated. In this paper, the role of ferroptosis in developing T2DM and osteoporosis is reviewed, with the intention of providing novel insights into the pathophysiologic investigation of DOP. Furthermore, possible therapeutic compounds that target the ferroptosis signaling system are presented, and ways for leveraging ferroptosis in the prevention and treatment of DOP are examined. These findings are anticipated to offer new directions for the therapeutic intervention and drug development for DOP.