The link between type 2 diabetes (T2D) and the severe outcomes of COVID-19 has raised concerns about the optimal management of patients with T2D. This study aimed to investigate the clinical characteristics and outcomes of T2D patients hospitalized with COVID-19 and explore the potential associations between chronic T2D treatments and adverse outcomes. This was a multicenter prospective cohort study of T2D patients hospitalized with COVID-19 in Greece during the third wave of the pandemic (February–June 2021). Among the 354 T2D patients included in this study, 63 (18.6%) died during hospitalization, and 16.4% required ICU admission. The use of DPP4 inhibitors for the chronic management of T2D was associated with an increased risk of in-hospital death (adjusted odds ratio (adj. OR) 2.639, 95% confidence interval (CI) 1.148–6.068,p= 0.022), ICU admission (adj. OR = 2.524, 95% CI: 1.217–5.232,p= 0.013), and progression to ARDS (adj. OR = 2.507, 95% CI: 1.278–4.916,p= 0.007). Furthermore, the use of DPP4 inhibitors was significantly associated with an increased risk of thromboembolic events (adjusted OR of 2.249, 95% CI: 1.073–4.713,p= 0.032) during hospitalization. These findings highlight the importance of considering the potential impact of chronic T2D treatment regiments on COVID-19 and the need for further studies to elucidate the underlying mechanisms.