Type-2 diabetes mellitus (T2DM) is a chronic immuno-inflammatory and metabolic disease characterized by hyperglycemia and insulin resistance with corresponding hyperinsulinemia. On the other hand, Alzheimer's disease (AD) is a neurodegenerative disease involving cognitive impairment, neuronal dysfunction, and memory loss. Several recently published literatures suggest a causal relationship between T2DM and AD. In this review, we have discussed several potential mechanisms underlying diabetes-induced cognitive impairment which include, abnormal insulin signaling, amyloid-β accumulation, oxidative stress, immuno-inflammation, mitochondrial dysfunction, advanced glycation end products, acetylcholinesterase and butyrylcholinesterase, advanced lipid peroxidation products, and apolipoprotein E. All these interconnected mechanisms may act either individually or synergistically which eventually leads to neurodegeneration and AD.