COVID-19 caused by SARS-COV-2 infection can lead to multi-organ injuries and significant mortality in severe and critical patients, especially among those individuals with type 2 diabetes (T2D) as a comorbidity. While attenuated mortality was observed with aggressive glucose control, it was unclear whether therapeutic regimens including insulin treatment were beneficial for patients with COVID-19 and T2D. This retrospective study investigated 689 patients with COVID-19 and T2D from a cohort of 3,305 cases from Wuhan, China. Unexpectedly, we found that insulin treatment for patients with COVID-19 and T2D was associated with a significant increase in mortality (27.2% versus 3.5%; adjusted HR, 5.38 [2.75–10.54]). Further analysis showed that insulin treatment was associated with enhanced systemic inflammation and aggravated injuries of vital organs. Therefore, insulin treatment for patients with COVID-19 and T2D should be used with caution.