OBJECTIVE Although patients with type 2 diabetes have double the risk of dementia, potential racial/ethnic differences in dementia risk have not been explored in this population. We evaluated racial/ethnic differences in dementia and potential explanatory factors among older diabetic patients. RESEARCH DESIGN AND METHODS We identified 22,171 diabetic patients without preexisting dementia aged ?60 years (14,546 non-Hispanic whites, 2,484 African Americans, 2,363 Latinos, 2,262 Asians, 516 Native Americans) from the Kaiser Permanente Northern California Diabetes Registry. We abstracted prevalent medical history (1 January 1996 to 31 December 1997) and dementia incidence (1 January 1998 to 31 December 2007) from medical records and calculated age-adjusted incidence densities. We fit Cox proportional hazards models adjusted for age, sex, education, diabetes duration, and markers of clinical control. RESULTS Dementia was diagnosed in 3,796 (17.1%) patients. Age-adjusted dementia incidence densities were highest among Native Americans (34/1,000 person-years) and African Americans (27/1,000 person-years) and lowest among Asians (19/1,000 person-years). In the fully adjusted model, hazard ratios (95% CIs) (relative to Asians) were 1.64 (1.30-2.06) for Native Americans, 1.44 (1.24-1.67) for African Americans, 1.30 (1.15-1.47) for non-Hispanic whites, and 1.19 (1.02-1.40) for Latinos. Adjustment for diabetes-related complications and neighborhood deprivation index did not change the results. CONCLUSIONS Among type 2 diabetic patients followed for 10 years, African Americans and Native Americans had a 40-60% greater risk of dementia compared with Asians, and risk was intermediate for non-Hispanic whites and Latinos. Adjustment for sociodemographics, diabetes-related complications, and markers of clinical control did not explain observed differences. Future studies should investigate why these differences exist and ways to reduce them.