Objective: To investigate if magnetic resonance spectroscopy (MRS) is the best Magnetic Resonance (MR)-based method when compared to gradient-echo magnetic resonance imaging (MRI) for the detection and quantification of liver steatosis in diabetic patients in the clinical practice using liver biopsy as the reference standard, and to assess the influence of steatohepatitis and fibrosis on liver fat quantification. Methods: Institutional approval and patient consent were obtained for this prospective study. Seventy-three patients with type 2 diabetes (60 women and 13 men; mean age, 5469 years) underwent MRI and MRS at 3.0 T. The liver fat fraction was calculated from triple- and multi-echo gradient-echo sequences, and MRS data. Liver specimens were obtained in all patients. The accuracy for liver fat detection was estimated by receiver operator characteristic (ROC) analysis, and the correlation between fat quantification by imaging and histolopathology was analyzed by Spearman’s correlation coefficients. Results: The prevalence of hepatic steatosis was 92%. All gradient-echo MRI and MRS findings strongly correlated with biopsy findings (triple-echo, rho = 0.819; multi-echo, rho = 0.773; MRS, rho = 0.767). Areas under the ROC curves to detect mild, moderate, and severe steatosis were: triple-echo sequences, 0.961, 0.975, and 0.962; multi-echo sequences, 0.878, 0.979, and 0.961; and MRS, 0.981, 0.980, and 0.954. The thresholds for mild, moderate, and severe steatosis were: triple-echo sequences, 4.09, 9.34, and 12.34, multi-echo sequences, 7.53, 11.75, and 15.08, and MRS, 1.71, 11.69, and 14.91. Quantification was not significantly influenced by steatohepatitis or fibrosis. Conclusions: Liver fat quantification by MR methods strongly correlates with histopathology. Due to the wide availability and easier post-processing, gradient-echo sequences may represent the best imaging method for the detection and quantification of liver fat fraction in diabetic patients in the clinical practice.