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Background: The mechanisms underlying diabetic encephalopathy are largely unknown, and no effective treatments are available. Catalpol has received much attention due to its numerous biological effects, especially in neuroprotective studies. The aim of this study was to investigate the effects of catalpol on cognitive functions in diabetic rats and the underlying mechanisms., Methods: A rat model of diabetes was established by streptozotocin injection, followed by intraperitoneal infusion of catalpol after 10 weeks. Two weeks later, the Morris water maze was used to test the spatial learning performance. Nissl staining was performed to evaluate the morphological changes in the hippocampus. Expression of protein kinase Cγ (PKCγ) and caveolin-1 (Cav-1) in the hippocampus were assessed by reverse transcription PCR and Western blotting. Activities of anti-oxidative enzymes such as glutathione (GSH), superoxide dismutase (SOD) and catalase (CAT) and levels of malonaldehyde (MDA) were measured using commercial kits., Results: Significant hippocampal neuronal injury was observed in rats with streptozotocin-induced diabetes. Moreover, cognitive dysfunction was associated with markedly increased oxidative stress in the brain. Catalpol treatment significantly attenuated cognitive deficits, neuronal damage, and oxidative stress in the brain of diabetic rats. Biochemical analyses showed that catalpol reversed the down-regulation of PKCγ and Cav-1 expression in the diabetic rats., Conclusions: Spatial memory in diabetic rats is associated with the expression of PKCγ and Cav-1. Catalpol treatment markedly attenuated oxidative stress, reversed the alteration of PKCγ, Cav-1 and spatial memory deficits.