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Background: The association between caffeine and cognitive performance has not been tested in older individuals with type 2 diabetes (T2D). Its association with brain volume in T2D has been tested only in animals., Methods: We examined the association of caffeine with cognitive function and brain volume in a sample of elderly diabetics participating in the Israel Diabetes and Cognitive Decline Study (n = 638) and the moderating effect of age on this association. In a subsample (n = 185) with magnetic resonance imaging, we also examined these associations with gray and white matter volumes (GM/WM)., Results: Using linear regression adjusting for cognition-related covariates, we found that higher caffeine intake was associated with better function in overall cognition (p = .018), attention/working memory (p = .002), executive functioning (p = .047), and semantic categorization (p = .026). Interaction analyses of caffeine intake with age were significant for semantic categorization (p = .025), and approached significance for overall cognition (p = .066). This association was driven by the older group (above-median) for whom the association of caffeine intake with semantic categorization (p = .001), attention/working memory (p = .007), executive functioning (p = .005), and overall cognition (p = .002) were significant. In the magnetic resonance imaging subsample, there was an interaction (p = .034) of caffeine intake with age for GM volume; in the older group, higher caffeine intake was associated with greater GM volume (β = .198, p = .033)., Conclusions: Caffeine intake may have a beneficial role in cognitive functioning of elderly adults with T2D, which may be moderated by age. Greater GM volume may be a mechanism underlying the association of higher caffeine intake with better cognitive function., (© The Author(s) 2018. Published by Oxford University Press on behalf of The Gerontological Society of America. All rights reserved. For permissions, please e-mail: journals.permissions@oup.com.)