The addiction-causing chemical is strongly linked to persistently raised blood sugar levels among diabetics, according to new evidence.
Scientists warning of the danger said anyone with diabetes should "make every effort" to quit smoking.
There may also be implications for diabetics attempting to give up the habit who use nicotine-replacement therapy for extended periods.
Almost three million people in the UK are diagnosed with diabetes, and close to a million more may have the condition without knowing it.
Complications of the disease include potentially life-threatening heart attacks, strokes, kidney failure and nerve damage.
They tend to result from blood sugar levels running out of control and wreaking destruction in the body. The key to preventing complications is good management of blood sugar.
Doctors have long known that smoking increases the risk of diabetic complications, but it has not been clear what tobacco substances are to blame.
The new research, reported at the 241st national meeting of the American Chemical Society in Anaheim, California, points to the prime suspect being nicotine.
Using human blood samples, the scientists showed that nicotine concentrations typical of those in smokers appeared to raise long-term blood sugar levels in diabetics.