Introduction Type 2 diabetes is a public health concern, but psychosocial factors that may protect against the disease are unknown. This study examines whether a positive psychosocial environment in childhood is associated with lower risk for Type 2 diabetes in adulthood or healthier glucose trajectories over the life course, and whether BMI mediates the associations. Methods A cohort of 3,596 Finnish children was followed into adulthood over 32 years. An overall positive psychosocial score, consisting of six subdomains, was measured at study baseline (1980). Relative risk ratios and multilevel growth curve modeling were used to examine associations of the psychosocial score with Type 2 diabetes (2012) and glucose trajectories (1986–2012). The mediating effect by BMI was examined using mediation analysis. The analyses were conducted between June 2015 and January 2016. Results There was a 21% decrease in the rate of Type 2 diabetes (relative risk ratio, 0.79; 95% CI=0.66, 0.94) for each 1-SD increase in the positive psychosocial score after adjustment for childhood cardiovascular risk factors and dietary behaviors. Adult BMI mediated 52% and weight gain mediated 25% of the association. The growth curve model showed healthier glucose trajectories (age X psychosocial score interaction, b= –0.01; p=0.010) for participants with higher versus lower positive psychosocial score in childhood. Conclusions Positive psychosocial environment in childhood seems to have beneficial influences on the risk for Type 2 diabetes over the life span. RCTs will be required to see if interventions directed at early-life circumstances are warranted.