Aim To estimate the associations between risk factors and cognitive decline (CD)/dementia, and the sex differences in these risk factors in individuals with type 2 diabetes, while accounting for the competing risk of death. Materials and Methods The Action in Diabetes and Vascular Disease: Preterax and Diamicron Modified Release Controlled Evaluation (ADVANCE) trial of 11,140 individuals with type 2 diabetes was used to estimate the odds of CD/dementia using multinomial logistic regression. Results During a median 5-year follow-up, 1827 participants (43.2% women) had CD/dementia (1718 with CD only; 21 with dementia only; 88 with CD and dementia), and 929 (31.0% women) died without CD/dementia. Women had lower odds of CD/dementia than men (odds ratio [OR] [95% confidence interval], 0.88 [0.77, 1.00]); older age, higher total cholesterol, HbA1c, waist circumference, waist-to-height ratio, moderately increased albumin-creatinine ratio, stroke/transient ischaemic attack and retinal disease were each associated with greater odds of CD/dementia; higher years at education completion, baseline cognitive function, taller stature and current alcohol use were inversely associated. Higher waist circumference (women-to-men ratio of ORs [ROR], 1.05 [1.00, 1.10] per 5 cm) and presence of anxiety/depression (ROR, 1.28 [1.01, 1.63]) were associated with greater ORs for CD/dementia in women than men. Conclusions Several risk factors were associated with CD/dementia. Higher waist circumference and mental health symptoms were more strongly associated with CD/dementia in women than men. Further studies should examine the mechanisms that underlie these sex differences.