Memory and cognitive impairment have emerged as significant comorbidities associated with diabetes, yet effective treatment remains elusive. Various studies have shown that human placental extract (HPE) is rich in bioactive molecules that exhibit anti-inflammatory, antioxidant, anti-apoptotic, and immunomodulatory properties. However, the impact of HPE on memory and cognitive decline is not well understood. This study aimed to investigate the therapeutic effects of HPE on memory and cognitive dysfunction induced by streptozotocin (STZ) in rats, while also exploring the underlying mechanisms. To induce type 2 diabetes mellitus (T2DM), rats were first fed a high-fat diet for two weeks, followed by a single intraperitoneal injection of STZ (40 mg/kg body weight) and subsequently treated with HPE (20 mg/kg body weight per day) for 14 days. The results of our behavioral tests demonstrated that HPE significantly enhanced learning, memory, and cognitive function in rats subjected to STZ administration. Specifically, HPE increased the discrimination index in the novel object recognition test from a negative value in STZ rats to a positive value in treated rats and improved spontaneous alternation in the T-maze from 41.25 ± 8.25% to 74.50 ± 8.50%. Additionally, HPE notably improved serum levels of insulin, glucose, the homeostatic model assessment of insulin resistance (HOMA-IR), and lipid profiles compared to untreated diabetic rats. It also modulated oxidative stress markers, antioxidants, as well as pro-inflammatory cytokines and neurochemicals levels in hippocampal tissue, underscoring its antioxidant and anti-inflammatory properties. Notably, HPE treatment improved the neurological morphology of the hippocampus and reduced DNA damage. The percentage of tailed cells dropped from 25.67 ± 0.33 in diabetic rats to 13.67 ± 0.88 with HPE treatment. In summary, HPE exhibits neuroprotective effects and could serve as a promising therapeutic strategy for addressing neurodegenerative symptoms associated with T2DM in a rat model.