Understanding of the role of insulin in the brain has gradually expanded, from initial conceptions of the brain as insulin-insensitive through identification of a role in regulation of feeding, to recent demonstration of insulin as a key component of hippocampal memory processes. Conversely, systemic insulin resistance such as that seen in type 2 diabetes is associated with a range of cognitive and neural deficits. Here we review the evidence for insulin as a cognitive and neural modulator, including potential effector mechanisms, and examine the impact that type 2 diabetes has on these mechanisms in order to identify likely bases for the cognitive impairments seen in type 2 diabetic patients.