Background: Diabetes mellitus is the most prevailing metabolic disease. It causes structural and functional alterations in several organs, including the central nervous system. Altered glucose metabolism, atherosclerosis, and inflammation of blood vessels are seen in diabetes. This may lead to neuronal degeneration and decline in cognition. Event-related potential P300 can detect cognitive decline before the emergence of obvious neurological manifestations. Objective: The aim of this study is to assess and compare the P300 latencies in subjects with type 2 diabetes mellitus and in nondiabetic subjects and to determine the influence of type 2 diabetes mellitus on cognitive functions. Materials and Methods: In this study our sample size was 248 subjects, with type 2 diabetes mellitus patients ( n = 124) and healthy controls ( n = 124) between the age group of 31 and 60 years. This cross-sectional comparative study was conducted at SRM Medical College Hospital and Research Centre. The subjects were evaluated by a structured interview and they were assessed with a general health questionnaire to rule out any subpsychiatric illness. Fasting and postprandial blood glucose, HbA1c level, lipid profile, and creatinine were estimated. P300 amplitude and peak latencies were recorded using the standard auditory oddball paradigm. Results: The latencies of P300 were significantly increased and the amplitude of P300 was significantly reduced in the diabetic group when compared to the control group ( P < .001). P300 latency has a positive correlation with the HbA1c levels ( r = 0.136) and the duration of diabetes ( r = 0.231). Conclusion: Prolongation of P300 latencies and the decreased amplitude in diabetic subjects may suggest the existence of a cognitive decline in individuals with type 2 diabetes compared to healthy individuals.