Background: Cognition is any intellectual process by which one becomes aware of perceiving, reasoning, judgment, memory, and thinking. Cognitive impairment is the major health problem particularly in elderly with type 2 diabetes mellitus. So, frequent screening of cognitive status is important for adults living with type 2 diabetes. Objective: To assess prevalence of cognitive impairment and identify associated factors of adult with type 2 diabetes mellitus having follow up care in Bahir Dar city referral hospitals. Methods: Institution based cross sectional study was conducted among 421 adults with type 2 diabetic mellitus from March 17th - April 24th /2021. Systematic random sampling technique was used to select the study participants. Structured and pretested questionnaire have been used to collect socio demographic and behavioural data. An adopted Standardised Mini Mental State Examination form was used for face-to-face interview. The standardised mini mental state examination scale ranges from 0 to 30 points, with higher score indicating better cognitive state. Binary logistic regression was used to see the association between each independent variable with the dependent variable. Variables with P-value < 0.25 during bivariate analysis were considered for multivariable logistic regression analysis. Level of significance was declared at P value ≤ 0.05 with 95% confidence interval. Result: More than half 211 (52.0%) of the participants were males. The mean age of the study participants was 56.12±11.15 years. The median body mass index, fasting blood glucose, and duration of diabetics of the study subjects were 24.9 kg/m2, 134.0 mg/dl, and 10 years respectively. The overall median cognitive score of adults with type 2 diabetes was found to be 26 with interquartile range of 3 points while measured with standardised mini mental state examination. Among the study participants 112 (27.6%) were found to have cognitive impairment. The study revealed that age greater than 60 with odds ratio of [4.6 (1.03, 2.9), 95% CI], single marital status [2.2 (1.6, 9.4), 95% CI], educational level less than grade 8 [3.3 (1.3, 8.0), 95% CI] and between grade 9 and 12 [ 2.8 (1.18, 6.5), 95% CI], being farmer [9.4 (2.1, 40.9), 95% CI], presence of comorbidity [3.5(1.7, 7.23), 95% CI], and doing moderate physical exercise [0.35(0.1, 0.9), 95% CI] were significantly associated with cognitive status of the participants. Conclusion and recommendation: Cognitive impairment was common in the study population. Considering the factors that affect the respondents’ cognitive status in this study, there was a significant difference on the cognitive status of the respondents among different age group, marital status, education level, occupation, presence of comorbidity, and doing physical activities. All responsible bodies have to give more emphasis for individuals with type 2 diabetes patients which were older age, lower educated, single, farmer, and had comorbidities. Key words: Cognitive Impairment, associated factors, type 2 diabetes mellitus, Ethiopia.