The structural correlates of impaired cognition in type 2 diabetes are unclear. The present study compared cognition and brain magnetic resonance imaging (MRI) between type 2 diabetic patients and nondiabetic control subjects and assessed the relationship between cognition and MRI findings and blood pressure and metabolic control. The study included 113 patients and 51 control subjects. Brain MRI scans were rated for white matter lesions (WMLs), cortical and subcortical atrophy, and infarcts. Neuropsychological test scores were divided into five cognitive domains and expressed as standardized Z values. Type 2 diabetes was associated with deep WMLs (P = 0.02), cortical (P < 0.001) and subcortical (P < 0.05) atrophy, (silent) infarcts (P = 0.06), and impaired cognitive performance (attention and executive function, information-processing speed, and memory, all P < 0.05). Adjustment for hypertension did not affect the results. Within the type 2 diabetic group, cognitive function was inversely related with WMLs, atrophy, and the presence of infarcts (adjusted for age, sex, and estimated IQ), and there was a modest association with HbA1c and diabetes duration. This association was strongest for age, even more so than in control subjects. We conclude that cognitive impairments in patients with type 2 diabetes are not only associated with subcortical ischemic changes in the brain, but also with increased brain atrophy.