Diabetic encephalopathies are now accepted complications of diabetes. They appear to differ in type 1 and type 2 diabetes as to underlying mechanisms and the nature of resulting cognitive deficits. The increased incidence of Alzheimer's disease in type 2 diabetes is associated with insulin resistance, hyperinsulinemia and hyperglycemia, and commonly accompanying attributes such as hypercholesterolemia, hypertension and obesity. The relevance of these disorders as to the emergence of dementia and Alzheimer's disease is discussed based on epidemiological studies. The pathobiology of accumulation of β-amyloid and tau the hallmarks of Alzheimer's disease are discussed based on experimental data. Type 1 diabetic encephalopathy is likely to increase as a result of the global increase in the incidence of type 1 diabetes and its occurrence in increasingly younger patients. Alzheimer-like changes and dementia are not prominently increased in type 1 diabetes. Instead, the type 1 diabetic encephalopathy involves learning abilities, intelligence development and memory retrieval resulting in impaired school and professional performances. The major underlying component here appears to be insulin deficiency with downstream effects on the expression of neurotrophic factors, neurotransmitters, oxidative and apoptotic stressors resulting in defects in neuronal integrity, connectivity and loss commonly occurring in the still developing brain. Recent experimental data emphasize the role of impaired central insulin action and provide information as to potential therapies. Therefore, the underlying mechanisms resulting in diabetic encephalopathies are complex and appear to differ between the two types of diabetes. Major headway has been made in our understanding of their pathobiology; however, many questions remain to be clarified. In view of the increasing incidence of both type 1 and type 2 diabetes, intensified investigations are called for to expand our understanding of these complications and to find therapeutic means by which these disastrous consequences can be prevented and modified.