Cognitive dysfunction is increasingly recognized as an important comorbidity of diabetes mellitus. Different stages of diabetes-associated cognitive dysfunction exist, each with different cognitive features, affected age groups and prognoses and probably with different underlying mechanisms. Relatively subtle, slowly progressive cognitive decrements occur in all age groups. More severe stages, particularly mild cognitive impairment and dementia, with progressive deficits, occur primarily in older individuals (>65 years of age). Patients in the latter group are the most relevant for patient management and are the focus of this Review. Here, we review the evolving insights from studies on risk factors, brain imaging and neuropathology, which provide important clues on mechanisms of both the subtle cognitive decrements and the more severe stages of cognitive dysfunction. In the majority of patients, the cognitive phenotype is probably defined by multiple aetiologies. Although both the risk of clinically diagnosed Alzheimer disease and that of vascular dementia is increased in association with diabetes, the cerebral burden of the prototypical pathologies of Alzheimer disease (such as neurofibrillary tangles and neuritic plaques) is not. A major challenge for researchers is to pinpoint from the spectrum of diabetes-related disease processes those that affect the brain and contribute to development of dementia beyond the pathologies of Alzheimer disease. Observations from experimental models can help to meet that challenge, but this requires further improving the synergy between experimental and clinical scientists. The development of targeted treatment and preventive strategies will therefore depend on these translational efforts.