Although type-2 diabetes (T2D) has been reported to increase the risk of cognitive dysfunction and dementia, the underlying mechanisms remain unclear. Dementia-like pathology is attributed to the accumulation of cellular prion protein (PrPc) which plays a role in cognitive dysfunction. However, its involvement and regulation in diabetic dementia-like pathology is not well understood. Using T2D db/db (leptin receptor knockout) mice subjected to object recognition and Y-maze behavioral tests, we determined that short-term memory was compromised and that the mice displayed abrupt spontaneous behaviour compared to db/m control mice. MicroRNA analysis using qRT2-PCR array demonstrated a significant reduction in the transcript expression of microRNA-146a (miR-146a) in the brain of T2D db/db mice as compared to db/m controls. The sequence matching tools validated the binding of miR-146a to a conserved domain of the PrPc gene. Administration of mouse brain endothelial cell-derived exosomes (BECDEs) loaded with miR-146a into the brain's ventricle of T2D db/db mice attenuated brain PrPc levels and restored short-term memory function though not significant. Also, we observed hyperphosphorylation of tau through decreased expression of glycogen synthase kinase-3 in T2D db/db brains that regulates microtubule organization and memory function. We conclude that underexpression of miR-146a upregulates PrPc production in T2D db/db mice and the delivery of BECDEs loaded with a miR-146a can down regulate PrPc levels and restore short term memory function up to a certain extent.