Type 2 diabetes mellitus (T2DM) shares a common molecular mechanism and underlying pathology with dementia, and studies indicate that dementia is widespread in people with T2DM. Currently, T2DM-induced cognitive impairment is characterized by altered insulin and cerebral glucose metabolism, leading to a shorter life span. Increasing evidence indicates that nutritional and metabolic treatments can possibly alleviate these issues, as there is a lack of efficient preventative and treatment methods. The ketogenic diet (KD) is a very high-fat, low-carbohydrate diet that induces ketosis in the body by producing a fasting-like effect, and neurons in the aged brain are protected from damage by ketone bodies. Moreover, the creation of ketone bodies may improve brain neuronal function, decrease inflammatory expression and reactive oxygen species (ROS) production, and restore neuronal metabolism. As a result, the KD has drawn attention as a potential treatment for neurological diseases, such as T2DM-induced dementia. This review aims to examine the role of the KD in the prevention of dementia risk in T2DM patients and to outline specific aspects of the neuroprotective effects of the KD, providing a rationale for the implementation of dietary interventions as a therapeutic strategy for T2DM-induced dementia in the future.