Vascular risk factors including type 2 diabetes and hypertension play an important role on brain structural changes and cognitive impairment. However, it remains unclear whether risk factors increase the risk of cognitive decline through ischemic vascular change or degenerative neuropathology. We investigated the relationship between vascular or degenerative change of the brain, vascular risk factors and cognitive impairment. Seven-hundred and eighty-four volunteers took medical examination including brain imaging and neuropsychological tests for general intelligence, frontal lobe function, visuospatial function and affective function. Hippocampal volume and asymptomatic ischemic lesions were assessed on magnetic resonance imaging. Type 2 diabetes was associated with lower scores on frontal and visuospatial function tests and hippocampal atrophy which was related to decline of frontal and visuospatial function. However, type 2 diabetes did not contribute to ischemic vascular pathology. Hypertension was associated with ischemic white matter changes in addition to hippocampal atrophy, but the direct association with cognitive impairment is not significant. Thus, type 2 diabetes may cause reduction of fronto-parietal executive function through degenerative neuropathology, independent of ischemic vascular pathology.