People with diabetes mellitus are at increased risk of cognitive dysfunction. This review explores the relation between caffeine intake, diabetes, cognition and dementia, focusing on type 2 diabetes (T2DM). Epidemiological studies on caffeine/coffee intake and T2DM risk are reviewed. Next, the impact of T2DM on cognition is addressed. Finally, the potential for caffeine to modulate the risk of cognitive decline in the context of diabetes is explored. The conclusion is that, although epidemiological studies indicate that coffee/caffeine consumption is associated with a decreased risk of T2DM and possibly also with a decreased dementia risk, we can at present not be certain that these associations are causal. For now, recommendations for coffee consumption in individuals with T2DM or pre-diabetic stages are therefore difficult to establish, but it should be acknowledged that caffeine does appear to have several properties that warrant further investigations in this field.