Depression is a mood disorder that may increase risk for the development of insulin resistance (IR) and type 2 diabetes (T2D), and vice versa. However, the mechanistic pathway linking depression and T2D is not fully elucidated. The aim of this narrative review, therefore, was to discuss the possible link between depression and T2D. The coexistence of T2D and depression is twice as great compared to the occurrence of either condition independently. Hyperglycaemia and dyslipidaemia promote the incidence of depression by enhancing inflammation and reducing brain serotonin (5‐hydroxytryptamine [5HT]). Dysregulation of insulin signalling in T2D impairs brain 5HT signalling, leading to the development of depression. Furthermore, depression is associated with the development of hyperglycaemia and poor glycaemic control. Psychological stress and depression promote the development of T2D. In conclusion, T2D could be a potential risk factor for the development of depression through the induction of inflammatory reactions and oxidative stress that affect brain neurotransmission. In addition, chronic stress in depression may induce the development of T2D through dysregulation of the hypothalamic–pituitary–adrenal axis and increase circulating cortisol levels, which triggers IR and T2D.