Patients with Type 2 diabetes mellitus (T2DM) show cognitive and mood impairment, indicating potential for brain injury in regions that control these functions. However, brain tissue integrity in cognition, anxiety, and depression regulatory sites, and their associations with these functional deficits in T2DM subjects remain unclear. We examined gray matter (GM) changes in 34 T2DM and 88 control subjects using high-resolution T1-weighted images, collected from a 3.0-Tesla magnetic resonance imaging scanner, and assessed anxiety [Beck Anxiety Inventory], depressive symptoms [Beck Depression Inventory-II], and cognition [Montreal Cognitive Assessment]. We also investigated relationships between GM status of cognitive and mood control sites and these scores in T2DM. Significantly increased anxiety (p = 0.003) and depression (p = 0.001), and reduced cognition (p = 0.002) appeared in T2DM over controls. Decreased GM volumes appeared in several regions in T2DM patients, including the prefrontal, hippocampus, amygdala, insular, cingulate, cerebellum, caudate, basal-forebrain, and thalamus areas (p < 0.01). GM volumes were significantly associated with anxiety (r = -0.456,p = 0.009), depression (r = -0.465,p = 0.01), and cognition (r = 0.455,p = 0.009) scores in regions associated with those regulations (prefrontal cortices, hippocampus, para hippocampus, amygdala, insula, cingulate, caudate, thalamus, and cerebellum) in T2DM patients. Patients with T2DM show brain damage in regions that are involved in cognition, anxiety, and depression control, and these tissue alterations are associated with functional deficits. The findings indicate that mood and cognitive deficits in T2DM patients has brain structural basis in the condition.