OBJECTIVE - Type 2 diabetes leads to cognitive impairment and dementia, which may reflect microvascular and macrovascular complications as well as neurodegenerative processes. There are few studies on the anatomical basis for loss of cognitive function in type 2 diabetes. The objective of this study was to investigate the association between type 2 diabetes and markers of brain aging on magnetic resonance images, including infarcts, lacunes, and white matter hyperintensities as markers of vascular damage and general and hippocampal atrophy as markers of neurodegeneration in Japanese-American men born between 1900 and 1919 and followed since 1965 in the Honolulu-Asia Aging Study. RESEARCH DESIGN AND METHODS - Prevalent and incident dementia was assessed. Associations between magnetic resonance imaging markers and diabetic status were estimated with logistic regression, controlling for sociodemographic and other vascular factors. RESULTS - The prevalence of type 2 diabetes in the cohort is 38%. Subjects with type 2 diabetes had a moderately elevated risk for lacunes (odds ratio [OR] 1.6 [95% CI 1.0-2.6]) and hippocampal atrophy (1.7 [0.9-2.9]). The risk for both hippocampal atrophy and lacunes/infarcts was twice as high in subjects with compared with those without type 2 diabetes. Among the group with type 2 diabetes, those with the longest duration of diabetes, those taking insulin, and those with complications had relatively more pathologic brain changes. CONCLUSIONS - There is evidence that older individuals with type 2 diabetes have an elevated risk for vascular brain damage and neurodegenerative changes. These pathological changes may be the anatomical basis for an increased risk of cognitive impairment or dementia in type 2 diabetes.