Background Type 2 diabetes mellitus (T2DM) has been shown to result in medical complications on several organ systems including the kidneys, eyes, cardiovascular system, and most recently described the brain, including the hippocampus. There is also evidence that females are disproportionately affected by these medical complications. Brain volume reductions have also been associated with chronic low grade inflammation and dyslipidemia. This study investigated the relationships between T2DM, gender, inflammation, dyslipidemia and hippocampal volumes. Method Participant groups consisted of 40 obese adults with T2DM and 47 lean adults group-matched on age, gender, race, and socioeconomic status. Each participant underwent medical examination including a standard panel of blood tests, an MRI, and cognitive evaluation. Results We show that there is a gender difference in the association of T2DM and hippocampal volumes: diabetic women are most affected despite having better glucose control than their male counterparts. There were similar gender by diabetes interactions for HDL and HbA1c but they did not explain the gender hippocampal volume differences. Conclusions These important findings indicate that in addition to the higher rate of traditional medical complication, females with T2DM are more likely to also suffer more brain complication than males. These observations, if supported by larger studies, suggest that in the future gender could be considered when customizing g diabetes treatment.