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The hippocampus is a brain region critically involved in learning and memory and is particularly vulnerable to metabolic and inflammatory stresses. Diabetes mellitus, particularly type 2 diabetes mellitus (T2DM), is associated with cognitive decline and structural alterations in the hippocampus, a condition commonly referred to as diabetic encephalopathy (DE). Lipocalin-2 (LCN-2), an acute-phase glycoprotein involved in iron homeostasis and innate immunity, has emerged as an important mediator of neuroinflammation and glial reactivity in the central nervous system. Although LCN-2 has been implicated in several neurodegenerative disorders, its region-specific role in hippocampal dysfunction during T2DM remains incompletely understood. Unlike prior reviews that address DE broadly, the present review synthesizes current experimental and clinical evidence linking hippocampal LCN-2 to neuroinflammation, synaptic dysfunction, and cognitive impairment in T2DM, with particular emphasis on astrocyte-microglia crosstalk. We further discuss the potential therapeutic strategy of selectively modulating LCN-2 signaling as an alternative to broad anti-inflammatory approaches, along with its potential advantages and limitations.