Patients with type 2 diabetes (T2DM) have a two- to three-fold increased risk for Alzheimers disease (AD), the most common form of dementia. Vascular complications might explain partially the increased incidence of neurodegeneration in patients with T2DM. Alternatively, neuronal resistance for insulin/insulin-like growth factor-1 (IGF- 1) might represent a molecular link between T2DM and AD, characterizing AD as “brain-type diabetes”. According to this hypothesis, brains from AD patients showed substantially downregulated expression of the Insulin receptor (IR), the IGF-1 receptor (IGF-1R), and the insulin receptor substrate (IRS) proteins. Similar changes in insulin/IGF-1 signaling (IIS) have been described in animals fed a high fat diet and human T2DM, suggesting that decreased IIS might be involved in the pathogenesis of both T2DM and AD. In contrast, type 2 diabetic patients suffering from AD accumulate less β-amyloid (Aβ) compared to non-diabetic AD patients raising the question, whether the changes in IIS are cause, consequence, or compensatory counterregulation to neurodegeneration. Recent data in C. elegans showed that reducing IIS decreases Aβ toxicity. This effect is accomplished via two transcription factors downstream of IIS, DAF-16 and HSF- 1: The first detoxification path leads to degradation of the toxic misassemblies and is mediated via HSF-1. The second mechanism mediates the formation of low toxic, high molecular weight aggregates from highly toxic small molecular weight aggregates regulated by DAF-16 suggesting that Insulin/IGF-1 transmitted signals influence Aβ proteotoxicity. The current review discusses possible implications of recent findings in humans and model organisms for the understanding and possible therapeutic approaches of diabetes associated dementia.