How acute hyperglycaemia affects memory functions and functional brain responses in individuals with and without type 2 diabetes is unclear. Our aim was to study the association between acute hyperglycaemia and working, semantic, and episodic memory in participants with type 2 diabetes compared to a sex- and age-matched control group. We also assessed the effect of hyperglycaemia on working memory-related brain activity. A total of 36 participants with type 2 diabetes and 34 controls (mean age, 66 years) underwent hyperglycaemic clamp or placebo clamp in a blinded and randomised order. Working, episodic, and semantic memory were tested. Overall, the control group had higher working memory (mean z-score 33.15 ± 0.45) than the group with type 2 diabetes (mean z-score 31.8 ± 0.44, p = 0.042) considering both the placebo and hyperglycaemic clamps. Acute hyperglycaemia did not influence episodic, semantic, or working memory performance in either group. Twenty-two of the participants (10 cases, 12 controls, mean age 69 years) were randomly invited to undergo the same clamp procedures to challenge working memory, using 1-, 2-, and 3-back, while monitoring brain activity by blood oxygen level-dependent functional magnetic resonance imaging (fMRI). The participants with type 2 diabetes had reduced working memory during the 1- and 2-back tests. fMRI during placebo clamp revealed increased BOLD signal in the left lateral frontal cortex and the anterior cingulate cortex as a function of working memory load in both groups (3 2 1). During hyperglycaemia, controls showed a similar load-dependent fMRI response, whereas the type 2 diabetes group showed decreased BOLD response from 2- to 3-back. These results suggest that impaired glucose metabolism in the brain affects working memory, possibly by reducing activity in important frontal brain areas in persons with type 2 diabetes.