Diabetes is associated with metabolic dysfunction across multiple organ systems, and the central nervous system is no exception. Neurons in the diabetic brain exhibit functional alterations that may increase the risk of cognitive decline and Alzheimer’s disease. Diabetes is associated with changes in the hypothalamic-pituitary-adrenal (HPA) axis, but the relationship between HPA axis function and cognitive dysfunction in diabetes is still being elucidated. Here we review evidence for and against HPA axis dysfunction in diabetes, and its consequences for neuroplasticity in the hippocampus, a brain region that mediates certain aspects of learning and memory. The tripartite relationship between diabetes, HPA axis alterations, and cognitive impairment will be discussed. The evidence favors a role for adrenal steroid hormones as central and peripheral mediators of diabetes-induced cellular dysfunction. In the hippocampus, adrenal corticosteroids may perturb neurotrophic factor signaling, resulting in impaired neurogenesis, synaptic plasticity and cognitive function. The adverse effects of diabetes on hippocampal plasticity may be allayed by exercise and dietary energy restriction.