Introduction Recent studies in postmenopausal women have found associations of follicle-stimulating hormone (FSH) levels with both glucose metabolism and bone turnover. The objective of the study was to investigate whether FSH may contribute to suppressed bone turnover markers (BTMs) in postmenopausal women with type 2 diabetes (T2D). Materials and methods 888 postmenopausal women with T2D, 352 nondiabetes (prediabetes plus normoglycemia) were included from the METAL study. HbA1c, sex hormones, 25-hydroxy vitamin D (25(OH)D), serum procollagen type I N-terminal propeptide (P1NP), and beta-C-terminal telopeptide (beta-CTX) were measured. Results P1NP and beta-CTX decreased in postmenopausal T2D women compared with nondiabetes controls (both p < 0.001). The major factors responsible for the changes in P1NP were HbA1c (beta = - 0.050, p < 0.001), 25(OH)D (beta = - 0.003, p = 0.006), FSH (beta = 0.001, p = 0.044) and metformin (beta = - 0.109, p < 0.001), for beta-CTX were HbA1c (beta = - 0.049, p < 0.001), body mass index (BMI) (beta = - 0.011, p = 0.005), 25(OH)D (beta = - 0.003, p = 0.003), FSH (beta = 0.002, p = 0.022) and metformin (beta = - 0.091, p = 0.001) in postmenopausal T2D women based on multivariate regression analysis. With the increase in HbA1c, FSH decreased significantly (p for trend < 0.001). Mediation analysis demonstrated that FSH partly mediated the suppression of LnP1NP and Ln beta-CTX by HbA1c (beta = - 0.009 and - 0.010, respectively), and Ln beta-CTX by BMI (beta = - 0.015) when multiple confounders were considered (all p < 0.05). Conclusion HbA1c was the crucial determinant contributing to the suppression of BTMs. FSH might play a novel mediation role in BTM suppression due to HbA1c or BMI.