Diabetic encephalopathy (DE) is one of the most common complications of diabetes mellitus (DM). Persistent hyperglycemia in DM patients may induce numerous pathophysiological changes, such as chronic inflammation, increased permeability of blood-brain barrier, impaired neurogenesis, and brain atrophy, which eventually impair cognitive function. The dentate gyrus (DG) of hippocampus is a crucial region for learning and memory, as well as adult neurogenesis in mammals. Recent studies have shown that adult hippocampal neurogenesis (AHN) exists throughout life and is decreased with age, whereas AHN is significantly impaired in DE. Therefore, numerous efforts are currently focused on exploring the mechanisms underlying cognitive impairment induced by AHN dysfunction in DE. Here, we summarize studies on the contributions of AHN disorders to the occurrence and development of DE and related mechanisms, in order to shed light on the prevention and treatment of DE.