BACKGROUND: Risk factors underlying the development and progression of some of the less well-recognised complications of type 2 diabetes, including cognitive impairment and non-alcoholic fatty liver disease, are poorly understood. The Edinburgh Type 2 Diabetes Study was established in 2006 in order to investigate the role of potential risk factors in these complications, as well as to further investigate mechanisms underlying the development and progression of micro and macrovascular disease in type 2 diabetes. METHODS AND DESIGN: The study is designed as a prospective cohort study. Participants recruited at baseline (2006-2007) constitute 1066 men and women aged 60 to 75 years with established type 2 diabetes, living in the Lothian region of central Scotland. Subjects underwent detailed cognitive and physical examination, the latter including measures of micro- and macro-vascular disease, glycaemic control, body fat composition and plasma inflammatory markers, cortisol, lipids and liver function tests. Participants were re-examined after one year with hepatic ultrasonography and additional measures of vascular disease. This paper reports the methods of recruitment to the study and examinations performed at baseline and one year. Follow-up cognitive, vascular and liver assessments are scheduled for 2010-2011 when subjects will have been in the study for 4 years. DISCUSSION: This study will provide a wealth of epidemiological and biomarker data that should be invaluable in the identification of potentially modifiable, causal risk factors for diabetes-related cognitive impairment, liver dysfunction and vascular disease, which can be targeted for the development of preventive and therapeutic interventions.