Recent data suggest that olfactory deficits could represent an early marker and a pathogenic mechanism at the basis of cognitive decline in type 2 diabetes (T2D). However, research is needed to further characterize olfactory deficits in diabetes, their relation to cognitive decline and underlying mechanisms.The aim of this study was to determine whether T2D impairs odour detection, olfactory memory as well as neuroplasticity in two major brain areas responsible for olfaction and odour coding: the main olfactory bulb (MOB) and the piriform cortex (PC), respectively. Dipeptidyl peptidase-4 inhibitors (DPP-4i) are clinically used T2D drugs exerting also beneficial effects in the brain. Therefore, we aimed to determine whether DPP-4i could reverse the potentially detrimental effects of T2D on the olfactory system.Non-diabetic Wistar and T2D Goto-Kakizaki rats, untreated or treated for 16 weeks with the DPP-4i linagliptin, were employed. Odour detection and olfactory memory were assessed by using the block, the habituation-dishabituation and the buried pellet tests. We assessed neuroplasticity in the MOB by quantifying adult neurogenesis and GABAergic inhibitory interneurons positive for calbindin, parvalbumin and carletinin. In the PC, neuroplasticity was assessed by quantifying the same populations of interneurons and a newly identified form of olfactory neuroplasticity mediated by post-mitotic doublecortin (DCX) + immature neurons.We show that T2D dramatically reduced odour detection and olfactory memory. Moreover, T2D decreased neurogenesis in the MOB, impaired the differentiation of DCX+ immature neurons in the PC and altered GABAergic interneurons protein expression in both olfactory areas. DPP-4i did not improve odour detection and olfactory memory. However, it normalized T2D-induced effects on neuroplasticity.The results provide new knowledge on the detrimental effects of T2D on the olfactory system. This knowledge could constitute essentials for understanding the interplay between T2D and cognitive decline and for designing effective preventive therapies.Electronic supplementary materialThe online version of this article (10.1186/s40478-018-0517-1) contains supplementary material, which is available to authorized users.