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Type-2 diabetes mellitus (DM) is associated with cognitive impairment. Increasing evidence establishes that neuro-inflammatory and oxidative stress condition plays a main role in the development of neurodegeneration. Epalrestat, an aldose reductase inhibitor is commonly prescribed for the treatment of diabetic peripheral neuropathy. Its beneficial effects for antioxidant, anti-inflammatory potential and being rhodanine structure containing compound suggests possible role for treatment of DM associated with cognitive dysfunction.In the present study, we evaluated the effect of epalrestat (54, 27, 13.5mg/kg, p.o.) and donepezil (1mg/kg, p.o.) on Tau protein levels, oxidative stress and inflammatory markers in high fat diet (HFD) and Streptozotocin (STZ; 35mg/kg, i.p.) induced cognitive impairment in diabetic rats.The epalrestat - 54, 27mg/kg p.o. and donepezil treatment significantly increased CAT (p<0.001, p<0.01, p<0.001) and GSH (p<0.001, p<0.01, p<0.001) activities respectively as compared to diabetic control rats. In addition, similar dose of epalrestat treatment indicated considerably lowered TAU protein levels (p<0.001, p<0.05) while no significant effect was noted with donepezil. These treatments significantly decreased gene expression of TNF-α (1.6, 1.6, 1.7 fold change) and IL-6 (2.5, 1.9, 1.7 fold change). Histopathological examination indicated that epalrestat could attenuate apoptosis of neurons, vacuolations and clumped processes, disorganization and thinning of all the layers.Our findings suggest that diabetic rats treated with epalrestat could ameliorate the cognition deficits and might act as a beneficial agent for prevention and treatment of cognitive impairment in diabetes.