Type 2 diabetes is associated with cognitive decrements, accelerated cognitive decline, and increased risk for dementia. Patients with the metabolic syndrome, a major risk factor for diabetes, may display comparable cognitive decrements as seen in type 2 diabetes. Currently, the impact of diabetes and prediabetes on cognition and the underlying organization of functional brain networks still remain to be elucidated. This study investigated whether functional brain networks are affected in type 2 diabetes and prediabetes. Forty-seven participants with diabetes, 47 participants with prediabetes, and 45 control participants underwent detailed cognitive testing and 3-Tesla resting state functional MRI. Graph theoretical network analysis was performed to investigate alterations in functional cerebral networks. Participants with diabetes displayed altered network measures, characterized by a higher normalized cluster coefficient and higher local efficiency, compared with control participants. The network measures of the participants with prediabetes fell between those with diabetes and control participants. Lower processing speed was associated with shorter path length and higher global efficiency. Participants with type 2 diabetes have altered functional brain networks. This alteration is already apparent in the prediabetic stage to a somewhat lower level, hinting at functional reorganization of the cerebral networks as a compensatory mechanism for cognitive decrements.