Type 1 diabetes can lead to several well-described complications such as retinopathy, nephropathy and peripheral neuropathy. Evidence is accumulating that it is also associated with gradually developing end-organ damage in the central nervous system. This relatively unknown complication can be referred to as "diabetic encephalopathy" and is characterised by electrophysiological and neuroradiological changes, such as delayed latencies of evoked potentials, modest cerebral atrophy and (periventricular) white matter lesions. Furthermore, individuals with type 1 diabetes may show performance deficits in a wide range of cognitive domains. The exact mechanisms underlying this diabetic encephalopathy are only partially known. Chronic metabolic and vascular changes appear to play an important role. Interestingly, the differences in the "cognitive profile" between type 1 and type 2 diabetes also suggest a critical role for disturbances of insulin action in the central nervous system.