Physical activity is associated with slower cognitive decline in old age. Type 2 diabetes (T2d) is a risk factor for dementia and cognitive decline. Physical activity protects against several T2d complications. Yet, little is known about the contribution of physical activity to cognitive health among the elderly with T2d. To examine the association between physical activity and cognitive decline in older adults with T2d. This is a prospective longitudinal study using data from the Israel Diabetes and Cognitive Decline (IDCD) study. ICDC study (N=1,213), is a population-based cohort of adults over the age of 65, diagnosed with type 2 diabetes, who were cognitively normal at baseline and followed up every 18 months. Participants with at least one follow-up assessment who were in the same physical activity group consistently and had complete demographic data. Physical activity was measured using Minnesota Leisure Time Activity Questionnaire, cognitive functioning was measured using a broad neuropsychological assessment measuring Executive Functioning, Attention/Working Memory, Semantic Categorization and Episodic Memory. Participants were classified into physical activity groups based on self-reported physical activity at baseline and all follow ups: "active" - participation in recreational physical activity (n=286); "non-active"- the only physical activity was walking from place to place (n=93) and "sedentary" (n=19). Linear mixed effects models were applied to adjust for key demographic and cardiovascular risk factors. Participants were 72.4 (SD 4.6) years old, had 13.3 (SD 3.6) years of education, and 163 (41%) were female. In the fully adjusted model, compared to the non-active group the active group had significantly slower rate of decline in Global Cognition (p=0.005), Executive Functioning (p=.014), and Attention/Working Memory (p=.01). There were no significant group differences for Semantic Categorization (p=.17) and Episodic Memory (p=.88). Among initially cognitively normal and independent older adults with T2d, a physically active lifestyle was associated with a slower rate of cognitive decline. Future research should examine whether promoting physical activity may prevent or delay onset of dementia in this high-risk population.