Diabetes mellitus type 2 (T2DM) is a widespread chronic medical condition with prevalence bordering on the verge of an epidemic. It is of great concern that cardiovascular disease is more common in patients with diabetes than the non-diabetic population. While hypertensive and ischemic heart disease is more common in diabetic patients, there is another type of heart disease in diabetes that is not associated with hypertension or coronary artery disease. This muscle functional disorder is termed “diabetic cardiomyopathy”. Diastolic dysfunction characterized by impaired diastolic relaxation time and reduced contractility precedes systolic dysfunction and is the main pathogenic hallmark of this condition. Even though the pathogenesis of “diabetic cardiomyopathy” is still controversial, impaired cardiac insulin sensitivity and metabolic overload are emerging as major molecular and metabolic mechanisms for cardiac dysfunction. Systemic insulin resistance, hyperinsulinemia, dysregulation of adipokine secretion, increases in circulating levels of inflammatory mediators, aberrant activation of renin angiotensin aldosterone system (RAAS), and increased oxidative stress contribute dysregulated insulin and metabolic signaling in the heart and development of diastolic dysfunction. In addition, maladaptive calcium homeostasis and endothelial cell dysregulation endoplasmic reticular stress play a potential role in cardiomyocyte fibrosis/diastolic dysfunction. In this review, we will focus on emerging molecular and metabolic pathways underlying cardiac dysfunction in diabetes. Elucidation of these mechanisms should provide a better understanding of the various cardiac abnormalities associated with diastolic dysfunction and its progression to systolic dysfunction and heart failure.