Increasing numbers of people are developing type 2 diabetes mellitus, but interventions to prevent and treat the classic microvascular and macrovascular complications have improved, so that people are living longer with the condition. This trend means that novel complications of type 2 diabetes mellitus, which are not targeted by current management strategies, could start to emerge. Cognitive impairment and dementia could come into this category. Type 2 diabetes mellitus is associated with a 1.5-2.5-fold increased risk of dementia. The etiology of dementia and cognitive impairment in people with type 2 diabetes mellitus is probably multifactorial. Chronic hyperglycemia is implicated, perhaps by promoting the development of cerebral microvascular disease. Data suggest that the brains of older people with type 2 diabetes mellitus might be vulnerable to the effects of recurrent, severe hypoglycemia. Other possible moderators of cognitive function include inflammatory mediators, rheological factors and dysregulation of the hypothalamic-pituitary-adrenal axis. Cognitive function should now be included as a standard end point in randomized trials of therapeutic interventions in patients with type 2 diabetes mellitus.