The participants in the study were 55 and older when the research began and were followed for an average of about six years. Alzheimer's developed in 151 participants, including 31 who had diabetes.
The researchers calculated that diabetics faced a 65 percent increased risk of developing the mind-robbing disease.
The link remained strong even when the researchers factored in the prevalence of strokes, which are a common complication of diabetes and are also believed to raise the risk of Alzheimer's.
Previous research has linked diabetes with memory problems, and diabetes is known to damage blood vessels that supply the brain. But studies looking specifically at diabetes and Alzheimer's have had conflicting results.
"This is one of the first long-term studies to follow people who start out with no evidence of Alzheimer's disease and track how having diabetes affects their risk of developing it," said William Thies, vice president for medical and scientific affairs at the Alzheimer's Association. "It's a powerful argument for doing everything you can to control your blood sugar."
Type 2 diabetes, the most common type of diabetes in older people, can often be controlled and even cured with exercise and diet.
Dr. George King of the Joslin Diabetes Center in Boston called the research "quite important in light of the fact that diabetes is exploding," with some 18 million Americans affected and the numbers expected to double by 2050.
He said if the link is real, there could be a corresponding surge in Alzheimer's cases.
The study was led by Drs. Zoe Arvanitakis and David Bennett and colleagues at Rush University Medical Center in Chicago. It was published Monday in the May issue of Archives of Neurology.
The next step for researchers is to find out exactly how diabetes might lead to Alzheimer's.
Some scientists have theorized that diabetes might cause an overabundance of glucose in the brain, which could damage brain cells.
One recent mouse study involving Joslin researchers suggests that insulin abnormalities in diabetes might affect a protein called tau, which in Alzheimer's forms tangles in brain cells.