Diabetes carries an increased risk of cognitive impairment and dementia. Late-onset Alzheimer’s disease is a heterogeneous disorder resulting from the cumulative perturbation of multiple pathways. Type 2 diabetes is associated with global brain atrophy and an increased burden of cerebral small-vessel disease evidenced by brain MRI. Brain imaging studies show both degenerative and vascular brain damage which develops slowly over the course of many years. A cluster of interconnected factors, including hyperglycemia, dyslipidemia, and insulin resistance are considered major contributing mechanisms. Vascular damage is a key underlying process. The vascular unit dysfunction resulting from endothelial distubance and release of inflammatory mediators contributes to neuronal degeneration by inducing vascular-derived insults in Alzheimer’s disease. Faulty clearance of the Abeta protein across the blood-brain-barrier determine Abeta retention in the brain, causing the promotion of cerebral amyloidosis. Glucose-mediated processes and other metabolic disturbances may also play a role. Oligomerized amylin which is produced in pancreatic islets in obese and insulin-resistant patients has been shown to accumulate in the cerebrovascular system and brain parenchyma of diabetic patients, serving as an another link between diabetes and Alzheimer’s disease. Management of vascular risk factors and optimization of glycemic control could have therapeutic benefit. Alterations in brain insulin metabolism has recently gained much interest as a pathophysiologic factor underlying this neurodegenerative disorder. Improving central nervous system insulin signaling via intranasal insulin or insulin sensitizers could represent an effective strategy to prevent or treat Alzheimer’s disease. A better understanding of the underlying mechanisms is necessary to establish interventions that will improve long-term cognitive outcomes for patients with type 2 diabetes.