Type 2 diabetes mellitus (T2DM) is a risk factor for cognitive dysfunction and dementia in the elderly. T2DM has been thought to be associated with vascular diseases, eventually leading to vascular dementia, but recent studies have established that T2DM is also associated with Alzheimer’s disease (AD). With the increase in the number of elderly individuals with T2DM, the number of diabetic patients with cognitive dysfunction has been increasing. T2DM may accelerate AD-associated pathologies through insulin resistance. Vascular pathologies may also be associated with cognitive dysfunction and dementia in T2DM subjects. Several other mechanisms also seem to be involved in T2DM-related cognitive dysfunction. More investigations to clarify the association of T2DM with cognitive impairment are warranted. These investigations may help to increase our understanding of AD and open a new door to the development of therapeutics. Recent pharmaceutical advancement in T2DM treatment has resulted in the availability of a wide range of antidiabetics. Some evidence has suggested that antidiabetic therapies help to prevent cognitive dysfunction. At present, however, the optimal level of blood glucose control and the best combination of medications to achieve it in terms of cognitive preservation have not been established. More investigation is warranted. Cognitive dysfunction is an emerging new complication of T2DM that requires further study.