Background: Patients with Type 2 diabetes (T2DM) are prone to develop dementia. Results from a recent study indicated that statin users had lower chance of developing incident dementia. However there is little information on the potential benefits of statin use on dementia in patients with T2DM cohort. Method: A population-based retrospective study using a nationwide cohort of National Health Insurance Research Database in Taiwan was performed. T2DM cohort with regular use of statins was followed up to 8 years. Multivariate cox-proportional hazards regression model was used to estimate the association between statin use and incidence of dementia including Alzheimer's disease and non-Alzheimer dementia after adjusting for several potential confounders. Results: Among 28,321 patients diagnosed with T2DM age above 50 and without history of dementia before 2000/1/1, 15,770 patients who had never used statin and 2,400 patients who regularly used statin drugs were enrolled. After adjusting for age group, gender, CCI (Charlson-Deyo comorbidity index) group, stroke types and anti-diabetic drugs, regular statin use was associated with a decreased risk of developing incident Alzheimer's disease dementia (adjusted HR: 0.48, 95% CI 0.30-0.76, p<0.001), but not in non-Alzheimer dementia (adjusted HR: 1.07, 95% CI 0.54-2.12 p = 0.844) in patients with T2DM. Further analysis showed significant protective effects of the use of atorvastatin and simvastatin. Conclusion: Regular use of statins might decrease the risk of developing Alzheimer's disease in patients with T2DM while no benefit was observed in non-Alzheimer dementia. Among statins, both atorvastatin and simvastatin showed significant benefits.