Vascular dementia (VaD) is a prevalent cause of dementia after Alzheimer's disease. Human umbilical cord mesenchymal stem cell-derived extracellular vesicles (hUCMSC-Evs) are critical for VaD treatment. We explored the mechanism of hUCMSC-Evs in VaD. VaD rat model was established by bilateral common carotid artery ligation and hUCMSC-Evs were extracted. VaD rats were injected with Evs through the tail vein. Rat neurological scores, neural behaviors, memory and learning abilities, brain tissue pathological changes, and neurological impairment were evaluated by Zea-Longa method, Morris water maze tests, HE staining, and ELISA (through acetylcholine [ACH] and dopamine [DA] assessment). Microglia M1/M2 polarization was detected by immunofluorescence staining. Pro-/anti-inflammatory factor levels in brain tissue homogenate, oxidative stress-related indicators, and p-PI3K, PI3K, p-AKT, AKT, and Nrf2 protein levels were determined by ELISA, kits, and Western blot. VaD rats were jointly treated with PI3K phosphorylation inhibitor Ly294002 and hUCMSC-Evs. VaD rats manifested increased neurological function injury scores, decreased cognitive function and learning ability, abnormal brain structure, obvious inflammatory infiltration, diminished ACH and DA levels, increased microglial cells and M1-polarized cells, M1/M2 polarization ratio, inflammation, and oxidative stress. hUCMSC-Evs alleviated the neurological damage of VaD rats, inhibited M1 polarization, inflammation, and oxidative stress of microglial cells in brain tissues of VaD rats, and activated the PI3K/AKT/Nrf2 pathway. Ly294002 partially averted the effects of hUCMSC-Evs on microglial polarization, inflammation, and oxidative stress. Briefly, hUCMSC-Evs activated the PI3K/AKT/Nrf2 pathway and inhibited microglial M1 polarization, inflammation, and oxidative stress, thus protecting VaD rat nerve functions.