Racial/ethnic disparities in the prevalence of type 2 diabetes mellitus (T2DM) are well documented and until recently, research has focused almost exclusively on individual-based determinants as potential contributors to these disparities (health behaviors, biological/genetic factors, and individual-level socio-demographics). Research on the role of neighborhood characteristics in relation to racial/ethnic disparities in T2DM is very limited. Therefore, the aim of this research is to identify and estimate the contribution of specific aspects of neighborhoods that may be associated with racial/ethnic disparities in T2DM. Data from the Boston Area Community Health III Survey (N = 2764) was used in this study, which is a community-based random-sample survey of adults in Boston, Massachusetts from three racial/ethnic groups (Black, Hispanic, and White). We applied two-level random intercepts logistic regression to assess the associations between race/ethnicity, neighborhood characteristics (census tract socioeconomic status, racial composition, property and violent crime, open space, geographic proximity to grocery stores, convenience stores, and fast food, and neighborhood disorder) and prevalent T2DM (fasting glucose > 125 mg/dL, HbA1c ≥ 6.5%, or self-report of a T2DM diagnosis). Black and Hispanic participants had 2.89 times and 1.48 times the odds of T2DM as White participants, respectively. Multilevel models indicated a significant between-neighborhood variance estimate of 0.943, providing evidence of neighborhood variation. Individual demographics (race/ethnicity, age and gender) explained 22.3% of the neighborhood variability in T2DM. The addition of neighborhood-level variables to the model had very little effect on the magnitude of the racial/ethnic disparities and on the between-neighborhood variability. For example, census tract poverty explained less than 1% and 6% of the excess odds of T2DM among Blacks and Hispanics and only 1.8% of the neighborhood variance in T2DM. While the findings of this study overall suggest that neighborhood factors are not a major contributor to racial/ethnic disparities in T2DM, further research is needed including data from other geographic locations.