We investigated the risk of developing chronic kidney disease (CKD) in patients with young-onset Type 2 diabetes (YOD, diagnosed age < 40 years). We enrolled 84,384 patients aged 20–64 who started anti-diabetic medication between 2010 and 2011 from the Korea National Health Insurance Sharing Service; patients with Type 1 diabetes or a history of CKD were excluded. Multivariate logistic regression analyses were performed to adjust for YOD-distinct variables and compare the incidence of CKD between YOD and late-onset diabetes (LOD, diagnosed age ≥ 40 years). During the median observation period of 5.16 years (interquartile range: 4.58–5.77 years), 1480 out of 77,039 LOD patients and 34 out of 7345 YOD patients developed CKD. Patients with YOD had distinct baseline characteristics compared with the patients with LOD. The odds ratio of developing CKD in patients with YOD over LOD was 1.70 (95% CI 1.15–2.51) after adjusting clinically distinct variables. The increased CKD odds in YOD compared with LOD was greater in the non-smoking group (OR 2.03, 95% CI 1.26–3.26) than in the smoking group (OR 1.49, 95% CI 0.74–2.98, p = 0.0393 for interaction). Among YOD patients, hypertension (34.76% vs. 64.71%, p = 0.0003), dyslipidemia (46.87% vs. 73.53%, p = 0.0019), and sulfonylurea use (35.54% vs. 52.94%, p = 0.0345) were associated with CKD development. YOD patients have a greater risk of developing CKD than LOD patients after adjusting clinically distinct variables.