Type 2 diabetes mellitus (T2DM) is strongly associated with an increased risk of developing cognitive dysfunction. Numerous studies have indicated that erythropoietin (EPO) has neurotrophic effects. Ferroptosis has been reported to be associated with diabetic cognitive dysfunction. However, the impact of EPO on T2DM-associated cognitive dysfunction and its protective mechanism remain unclear. To evaluate the effects of EPO on diabetes-associated cognitive dysfunction, we constructed a T2DM mouse model and found that EPO not only decreased fasting blood glucose but also ameliorated hippocampal damage in the brain. The Morris water maze test indicated that EPO improved cognitive impairments in diabetic mice. Moreover, a ferroptosis inhibitor improved cognitive dysfunction in mice with T2DM in vivo. Furthermore, a ferroptosis inhibitor, but not other cell death inhibitors, mostly rescued high-glucose damaged PC12 cell viability. EPO had a similar effect as the ferroptosis inhibitor, which increased cell viability in the presence of a ferroptosis inducer. In addition, EPO reduced lipid peroxidation, iron levels, and regulated ferroptosis-related expression of proteins in vivo and in vitro. These findings indicate that EPO ameliorates T2DM-associated cognitive dysfunction, which might be related to decreasing iron overload and inhibiting ferroptosis.