Diabetes mellitus is recognized as a group of heterogeneous disorders with the common elements of hyperglycaemia and glucose intolerance due to insulin deficiency, impaired effectiveness of insulin action, or both. The prevalence of Type 2 diabetes mellitus (T2DM) increases with age and dementia also increases its incidence in later life. Recent studies have revealed that T2DM is a risk factor for cognitive dysfunction or dementia, especially those related to Alzheimer's disease (AD). Insulin resistance, which is often associated with T2DM, may induce a deficiency of insulin effects in the central nervous system (CNS). Insulin may have a neuroprotective role and may have some impact on acetylcholine (ACh) synthesis. Hyperinsulinemia, induced by insulin resistance occurring in T2DM, may be associated with insulin deficiency caused by reduced insulin transport via the blood brain barrier (BBB). Insulin has multiple important functions in the brain. Some basic research, however, suggests that insulin accelerates Alzheimer-related pathology through its effects on the amyloid beta (Aβ) metabolism and tau phosphorylation.Asymptomatic ischemic lesions in T2DM subjects may lower the threshold for the development of dementia and this may explain the inconsistency between the basic research and clinicopathological studies.More research to elucidate the mechanism of neurodegeneration associated with T2DM is warranted.