Visual impairment is one of the most feared complications of Type 2 Diabetes Mellitus. Here, we aimed to investigate the role of occipital cortex γ-aminobutyric acid (GABA) as a predictor of visual performance in type 2 diabetes. 18 type 2 diabetes patients were included in a longitudinal prospective one-year study, as well as 22 healthy age-matched controls. We collected demographic data, HbA1C and used a novel set of visual psychophysical tests addressing color, achromatic luminance and speed discrimination in both groups. Psychophysical tests underwent dimension reduction with principle component analysis into three synthetic variables: speed, achromatic luminance and color discrimination. A MEGA-PRESS magnetic resonance brain spectroscopy sequence was used to measure occipital GABA levels in the type 2 diabetes group. Retinopathy grading and retinal microaneurysms counting were performed in the type 2 diabetes group for single-armed correlations. Speed discrimination thresholds were significantly higher in the type 2 diabetes group in both visits; mean difference (95% confidence interval), [0.86 (0.32-1.40) in the first visit, 0.74 (0.04-1.44) in the second visit]. GABA from the occipital cortex predicted speed and achromatic luminance discrimination thresholds within the same visit (r = 0.54 and 0.52; p = 0.02 and 0.03, respectively) in type 2 diabetes group. GABA from the occipital cortex also predicted speed discrimination thresholds one year later (r = 0.52; p = 0.03) in the type 2 diabetes group. Our results suggest that speed discrimination is impaired in type 2 diabetes and that occipital cortical GABA is a novel predictor of visual psychophysical performance independently from retinopathy grade, metabolic control or disease duration in the early stages of the disease.