Diabetic encephalopathy is a common consequence of diabetes mellitus that causes cognitive dysfunction and neuropsychiatric disorders. Praeruptorin C (Pra‐C) from the traditional Chinese medicinal herb Peucedanum praeruptorum Dunn. is a potential antioxidant and neuroprotective agent. This study was conducted to investigate the molecular mechanisms underlying the effect of Pra‐C on diabetic cognitive impairment. A novel object recognition test and the Morris water maze test were performed to assess the behavioral performance of mice. Electrophysiological recordings were made to monitor synaptic plasticity in the hippocampus. A protein–protein interaction network of putative Pra‐C targets was constructed, and molecular docking simulations were performed to predict the potential mechanisms of the action of Pra‐C. Protein expression levels were detected by western blotting. Pra‐C administration significantly lowered body weight and fasting blood glucose levels and alleviated learning and memory deficits in type 2 diabetic mice. Network pharmacology and molecular docking results suggested that Pra‐C affects the PI3K/AKT/GSK3β signaling pathway. Western blot analysis confirmed significant increases in phosphorylated PI3K, AKT, and GSK3β levels in vivo and in vitro upon Pra‐C administration. Pra‐C alleviated cognitive impairment in type 2 diabetic mice by activating PI3K/AKT/GSK3β pathway.