We studied the regulation dynamics of cerebral blood velocity (CBv) at middle cerebral arteries (MCA) in response to spontaneous changes of arterial blood pressure (ABP), termed dynamic cerebral autoregulation (dCA), and end-tidal CO2 as proxy for blood CO2 tension, termed dynamic vasomotor reactivity (DVR), by analyzing time-series data collected at supine rest from 36 patients with Type-2 Diabetes Mellitus (T2DM) and 22 age/sex-matched non-diabetic controls without arterial hypertension. Our analysis employed a robust dynamic modeling methodology that utilizes Principal Dynamic Modes (PDM) to estimate subject-specific dynamic transformations of spontaneous changes in ABP and end-tidal CO2 (viewed as two "inputs") into changes of CBv at MCA measured via Transcranial Doppler ultrasound (viewed as the "output"). The quantitative results of PDM analysis indicate significant alterations in T2DM of both DVR and dCA in terms of two specific PDM contributions that rise to significance (p < 0.05). Our results further suggest that the observed DVR and dCA alterations may be due to reduction of cholinergic activity (based on previously published results from cholinergic blockade data) that may disturb the sympatho-vagal balance in T2DM. Combination of these two model-based "physio-markers" differentiated T2DM patients from controls (p = 0.0007), indicating diabetes-related alteration of cerebrovascular regulation, with possible diagnostic implications.