Individuals with type 1 diabetes show mild performance deficits in a range of neuropsychological tests compared to healthy controls, but the mechanisms underlying this cognitive deterioration are still poorly understood. Basically, two diabetes-related mechanisms can be postulated: recurrent severe hypoglycaemia and/or chronic hyperglycaemia. Intensive insulin therapy in type 1 diabetes, resulting in a durable improvement of glycaemic control, has been shown to lower the risk of long-term microvascular and macrovascular complications. The down side of striving for strict glycaemic control is the considerably elevated risk of severe hypoglycaemia, sometimes leading to seizure or coma. While retrospective studies in adult patients with type 1 diabetes have suggested an association between a history of recurrent severe hypoglycaemia and a modest or even severe degree of cognitive impairment, large prospective studies have failed to confirm this association. Only fairly recently, better appreciation of the possible deleterious effects of chronic hyperglycaemia on brain function and structure is emerging. In addition, it can be hypothesized that hyperglycaemia associated microvascular changes in the brain are responsible for the cognitive decline in patients with type 1 diabetes. This review presents various pathophysiological considerations concerning the cognitive decline in patients with type 1 diabetes.