Diabetes mellitus (DM) is a complex metabolic condition characterized by persistent hyperglycemia and poor metabolism due to insulin production irregularities and/or insulin resistance type 2 DM (T2DM) and dementia are linked through a variety of methods. Thus, in terms of the long-term repercussions of diabetes, the current idea focuses on cognitive damage, the exact pathophysiology of which is unknown. A new term, “diabetes-associated cognitive decline,” has recently been proposed to aid study in this field. This review discusses how different variables contribute to the development of T2DM. Furthermore, we investigated an expanding body of literature on insulin signaling in diabetics, as well as various factors such as insulin resistance, hyperglycemia, neuroinflammation, and Aβ (amyloid beta) plaques that may act alone or in combination to link T2DM with cognitive impairments. Finally, we looked at how physical activity and a balanced diet might help fight the condition.