Type 2 diabetes predicts accelerated cognitive decline and brain atrophy. We hypothesized that impaired fasting glucose (IFG) and incident glucose disorders have detrimental effects on global cognition and brain volume. We further hypothesized that metabolic and inflammatory derangements accompanying hyperglycaemia contribute to change in brain structure and function. This was a longitudinal study of a community-dwelling elderly cohort with neuropsychological testing (n∈=∈880) and brain volumes by magnetic resonance imaging (n∈=∈312) measured at baseline and 2 years. Primary outcomes were global cognition and total brain volume. Secondary outcomes were cognitive domains (processing speed, memory, language, visuospatial and executive function) and brain volumes (hippocampal, parahippocampal, precuneus and frontal lobe). Participants were categorised as normal, impaired fasting glucose at both assessments (stable IFG), baseline diabetes or incident glucose disorders (incident diabetes or IFG at 2 years). Measures included inflammatory cytokines and oxidative metabolites. Covariates were age, sex, education, non-English speaking background, smoking, blood pressure, lipid-lowering or antihypertensive medications, mood score, apolipoprotein E genotype and baseline cognition or brain volume. Participants with incident glucose disorders had greater decline in global cognition and visuospatial function compared to normal, similar to that observed in baseline diabetes. Homocysteine was independently associated with the observed effect of diabetes on executive function. Apolipoprotein E genotype did not influence the observed effects of diabetes on cognition. Incident glucose disorders and diabetes were also associated with greater 2-year decline in total brain volume, compared to normal (40.0∈±∈4.2 vs. 46.7∈±∈5.7 mm3 vs. 18.1∈±∈6.2, respectively, p∈<∈0.005). Stable IFG did not show greater decline in global cognition or brain volumes compared to normal. Incident glucose disorders, like diabetes, are associated with accelerated decline in global cognition and brain volumes in non-demented elderly, whereas stable IFG is not. Preventing deterioration in glucose metabolism in the elderly may help preserve brain structure and function.