Type 2 diabetes increases the risk of developing cognitive dysfunction in the elderly in the form of short-term memory and executive function impairment. Genetic and diet-induced models of type 2 diabetes further support this link, displaying deficits in working memory, learning, and memory performance. The risk factors for diabetic cognitive dysfunction include vascular disease, hypoglycaemia, hyperlipidaemia, adiposity, insulin resistance, lifestyle factors, and genetic factors. Using neuronal imaging technologies, diabetic patients with cognitive dysfunction show atrophy of the whole brain, particularly the grey matter, hippocampus and amygdala; increased volume of the ventricular and white matter; brain infarcts; impaired network integrity; abnormal microstructure; and reduced cerebral blood flow and amplitude of low-frequency fluctuations. The pathogenesis of type 2 diabetes with cognitive dysfunction involves hyperglycaemia, macrovascular and microvascular diseases, insulin resistance, inflammation, apoptosis, and disorders of neurotransmitters. Large clinical trials may offer further proof of biomarkers and risk factors for diabetic cognitive dysfunction. Advanced neuronal imaging technologies and novel disease animal models will assist in elucidating the precise pathogenesis and to provide better therapeutic interventions and treatment.