Dementia and cognitive decline are among the most common and most feared conditions of old age making the identification of modifiable risk factors for dementia an urgent public health priority. Recently, an increasing body of data suggests that type 2 diabetes mellitus, a common condition in older persons, is associated with the development of dementia and cognitive decline. A systematic review of the medical literature of the past 15 years identified 40 original-report articles in the English language pertaining to the relation of diabetes to dementia and cognitive function in older persons. Most, but not all, of these studies suggest a detrimental effect of diabetes on cognitive function. Current research efforts are aimed at understanding the underlying neurobiologic mechanisms whereby diabetes causes dementia and cognitive impairment in order to develop rational interventions to prevent this recently documented adverse consequence.