The Royal College of Paediatrics and Child Health (RCPCH) found 715 people under the age of 25 were treated for the disease in England and Wales during 2016/17 and 78.6% of them were obese.
Dietitian and obesity expert Nigel Denby suggested the real figure could be much higher, if those unaware they have the disease are included.
The condition occurs when the body cannot make enough insulin to regulate blood sugar levels.
It is often linked to obesity and is most commonly seen in adults, where it can lead to a range of health problems such as heart disease and strokes.
The number of cases is up from the 507 registered in 2013/14, but the RCPCH recorded only those young people being treated in paediatric units, not by a GP, prompting Mr Denby to demand all responsible groups take action.
Mr Denby said: “If you’re a parent looking at your child thinking they’re a bit chubby, do something about it. If you’re a manufacturer of sugary, fatty food, start taking some social responsibility for the foods you’re producing. If you’re a fast food network, start paying some way towards the effects of the foods that you serve.
“If you’re a government, start putting your money where your mouth is. We see an NHS that is on its knees right now and we’re already preparing the next generation,” he added.
“Each and everyone of those children is going to require thousands and thousands of pounds of healthcare over the next 50, 60 years. We can’t afford to let this go on any longer,” he said.
Mr Denby claimed children are taught to want unhealthy foods and lead inactive lives, demanding of parents: “Would you be comfortable driving along the motorway with your children in the back-seat smoking and drinking a glass of vodka?
I doubt it.
“If you’re therefore comfortable looking at your child and they’re fat, you really need to wake up and smell the coffee,” he said.
Professor Russell Viner, president of the RCPCH, said: “A rise in Type 2 diabetes of this magnitude is alarming and shows that the childhood obesity epidemic is starting to bite.
“It’s also concerning that we might not be seeing the full picture.”
The Local Government Association, which represents 370 councils in England and Wales, called for more help for obese children and ethnic minorities, as almost half of those treated in 2016/17 were black or Asian.
“Cutting their public health funding is short-sighted and undermines any attempt to help our children live healthy and fulfilling lives,” she said.
Kathryn Kirchner, clinical advisor at Diabetes UK, said: “These figures are a stark reminder that we have a collective responsibility to push for the actions outlined in the most recent chapter of Childhood Obesity Plan, including clearer and more consistent food labelling.”
A Department of Health and Social Care spokeswoman said the government was determined to halve childhood obesity by 2030.