CONTEXT: Although depression is a risk factor for dementia in the general population, its association with dementia among patients with diabetes mellitus has not been well studied. OBJECTIVE: To determine whether comorbid depression in patients with type 2 diabetes increases the risk of development of dementia. DESIGN: The Diabetes and Aging Study was a cohort investigation that surveyed a racially/ethnically stratified random sample of patients with type 2 diabetes. SETTING: A large, integrated, nonprofit managed care setting in Northern California. PARTICIPANTS: A sample of 19 239 diabetes registry members 30 to 75 years of age. MAIN OUTCOME MEASURES: The Patient Health Questionnaire 8, International Classification of Diseases, Ninth Revision (ICD-9) diagnoses of depression, and/or antidepressant prescriptions in the 12 months prior to baseline were used to identify prevalent cases of depression. Clinically recognized dementia was identified among subjects with no prior ICD-9 Clinical Modification (ICD-9-CM) diagnoses of dementia. To exclude the possibility that depression was a prodrome of dementia, dementia diagnoses were only based on ICD-9-CM diagnoses identified in years 3 to 5 postbaseline. The risk of dementia for patients with depression and diabetes relative to patients with diabetes alone was estimated using Cox proportional hazard regression models that adjusted for sociodemographic, clinical, and health risk factors and health use. RESULTS: During the 3- to 5-year period, 80 of 3766 patients (2.1%) with comorbid depression and diabetes (incidence rate of 5.5 per 1000 person-years) vs 158 of 15 473 patients (1.0%) with diabetes alone (incidence rate of 2.6 per 1000 person-years) had 1 or more ICD-9-CM diagnoses of dementia. Patients with comorbid depression had a 100% increased risk of dementia during the 3 to 5 years postbaseline (adjusted hazard ratio, 2.02; 95% confidence interval, 1.73-2.35). CONCLUSION: Depression in patients with diabetes was associated with a substantively increased risk for development of dementia compared with those with diabetes alone.