A growing body of observational literature on the association between glucose-lowering treatments and all-cause mortality has been accumulating in recent years. However, many investigations present designs or analyses that inadequately address the methodological challenges involved. We conducted a systematic search with a non-systematic extension to identify observational studies published between 2000 and 2012 that evaluated the effects of glucose-lowering medications on all-cause mortality. We reviewed these studies and assessed the design and analysis methods used, with a focus on their ability to address specific methodological challenges. We described these methodological issues and their potential impact on observed associations, providing examples from the reviewed literature, and suggested possible approaches to manage these methodological challenges. We evaluated 67 publications of observational studies evaluating the association between glucose-lowering treatments and all-cause mortality. The identified methodological challenges included trade-offs associated with the outcome of all-cause mortality, incorrect temporal sequencing in administrative databases, inadequate treatment of time-varying hazards and treatment duration effects, unclear definition of the exposure risk window, improper handling of time-varying exposures, and incomplete accounting for confounding by indication. Most of these methodological challenges may be adequately addressed through the application of appropriate methods. Observational research plays an increasingly important role in assessing the clinical effects of diabetes therapy. The implementation of suitable research methods can reduce the potential for spurious findings, and thus the risk of misleading the medical community about benefits and harms of diabetes therapy.