Diabetes mellitus is a major chronic disease, which is connected to direct and indirect costs and productivity losses. However, its effects on labour market participation are not straightforward to identify, nor are they consistently included in cost-of-illness studies. First, this study aims to synthesise existing evidence regarding the impact of diabetes on labour market outcomes that imply a complete absence of work. Second, the analysis takes a particular look at relevant methodological choices and the resulting quality of the studies included. We conducted a systematic literature research (PubMed, Embase, PsychINFO), by applying a standard screening, selection and results extraction process, which considered all types of studies including cross-sectional and longitudinal approaches. Risk-of-bias and quality within the studies were assessed and results were compared. We dedicated special attention to the modelling of potential reverse causality between diabetes and labour market outcomes and the consideration of comorbidities and complications. Overall, 30 studies satisfied our inclusion criteria. We identified four main labour participation outcomes: absence of employment, unemployment, early retirement, and disability pension. The studies reviewed show a negative impact of diabetes on the labour market participation outcomes considered. However, only a few studies controlled for endogeneity, differentiated between type 1 and type 2 diabetes or modelled the impact of comorbidities. We report how modelling choices affect the directions and interpretations of the effects. The available evidence mainly suggests a negative impact of diabetes on several outcomes indicating labour market participation. The methodological limitations identified can guide future research with respect to both outcomes and methods. This study provides therefore an empirical contribution to the discussion on how to model the economic impact of diabetes.