In elderly populations, diabetes is associated with reduced muscle strength, poor muscle quality, and accelerated loss of muscle mass. In addition, diabetes mellitus increases risk for accelerated aging and for the development of frailty syndrome. This disease is also associated with a polypathological condition, and its complications progressively affect quality of life and survival. Exercise interventions, including resistance training, represent the cornerstones of diabetes management, especially in patients at severe functional decline. This review manuscript aimed to describe the beneficial effects of different exercise interventions on the functional capacity of elderly diabetics, including those at polypathological condition. The SciELO, Science Citation Index, MEDLINE, Scopus, SPORTDiscus, and ScienceDirect databases were searched from 1980 to 2015 for articles published from original scientific investigations. In addition to the beneficial effects of exercise interventions on glycemic control, and on the cardiovascular risk factors associated with diabetes, physical exercise is an effective intervention to improve muscle strength, power output, and aerobic power and functional capacity in elderly diabetic patients. Thus, a combination of resistance and endurance training is the most effective exercise intervention to promote overall physical fitness in these patients. In addition, in diabetic patients with frailty and severe functional decline, a multicomponent exercise program including strength and power training, balance exercises, and gait retraining may be an effective intervention to reduce falls and improve functional capacity and quality of life in these patients.