Type-1 IFN (interferon)-associated innate immune response is increasingly getting attention in neurodegenerative and metabolic diseases like type 2 diabetes (T2DM). However, its significance in T2DM/lipotoxicity-induced neuroglia changes and cognitive impairment is missing. The present study aims to evaluate the involvement of cGAS (cyclic GMP-AMP synthase)-STING (stimulator of interferon gene), IRF3 (interferon regulatory factor-3), TBK (TANK binding kinase)-mediated Type-1 IFN response in the diabetic brain, and lipotoxicity (palmitate-bovine serum albumin conjugate/PA-BSA)-induced changes in cells (neuro2a and BV2). T2DM was induced in C57/BL6 mice by feeding on a high-fat diet (HFD, 60% Kcal) for 16 weeks and injecting a single dose of streptozotocin (100 mg/kg, i.p) in the 12th week. Plasma biochemical parameter analysis, neurobehavioral assessment, protein expression, and quantitative polymerase chain reaction study were carried out to decipher the hypothesis. T2DM-associated metabolic and lipotoxic stress led to mitochondrial impairment causing leakage of mtDNA to the cytoplasm further commencing cGAS activation and its downstream signaling. The diseased hippocampus and cortex showed decreased expression of synaptophysin (p < 0.01) and PSD-95 (p < 0.01, p < 0.05) with increased expression of cGAS (p < 0.001), p-STING (p < 0.001), p-STAT1 (signal transducer and activator of transcription) (p < 0.01), and IFN-β (p < 0.001) compared to normal control. The IFN-β/p-STAT1-mediated microglia activation was executed employing a conditioned media approach. C-176, a selective STING inhibitor, alleviated cGAS/p-STING/IFN-β expression and proinflammatory microglia/M1-associated markers (CD16 expression, CXCL10, TNF-α, IL-1β mRNA fold change) in the diabetic brain. The present study suggests Type-1IFN response may result in neuroglia dyshomeostasis affecting normal brain function. Alleviating STING signaling has the potential to protect T2DM-associated central ailment.