Cognitive impairment is a major complication of diabetes mellitus, which is caused by constitutive hyperglycaemia. Ponicidin is a diterpenoid isolated from a Chinese traditional herb (Rabdosia rubescens) and demonstrates the various pharmacological effects. The goal of this study was to scrutinise the neuroprotective effect of ponicidin against diabetic nephropathy (DN) induced by streptozotocin (STZ). Intraperitoneal administration of STZ (55 mg/kg) was used for the induction of diabetes and rats were received oral administration of ponicidin (5, 10 and 15 mg/kg) until 28 days. The body weight, food intake, water intake and blood glucose level were assessed at regular time interval. Plasma insulin level, antioxidant, inflammatory cytokines, apoptosis marker and faecal gut microbiota compositions were estimated. DN-induced group rats revealed the augmented glucose level, water intake, food intake and reduced body weight. Ponicidin significantly (P < 0.001) repressed the glucose level and water food intake and improved the body weight and plasma insulin. Ponicidin significantly (P < 0.001) repressed the malonaldehyde (MDA) level and boosted the level of glutathione (GSH), glutathione reductase (GR) and superoxide dismutase (SOD) in the brain and serum level. Ponicidin significantly (P < 0.001) repressed the level of interleukin-1 beta (IL-1 beta), tumour necrosis factor-alpha (TNF-alpha) and interleukin-6 (IL-6) and enhanced the level of interleukin-4 (IL-4), interleukin-10 (IL-10) in the brain and serum level. DN group rats exhibited the enhanced relative abundance of Firmicutes, along with enhancing the Firmicutes/Bacteroidetes ratio and repressing the Bacteroidetes relative abundance. Ponicidin effectually restored the relative abundance of Allobaculum, Lactobacillus and Ruminococcus genera. Our findings clearly demonstrated that ponicidin has a neuroprotective effect against diabetic cognitive impairment through modulating the gut microbiome.