Impairment of insulin and IGF-I signaling in the brain is one of the causes of dementia associated with diabetes mellitus and Alzheimer's disease. However, the precise pathological processes are largely unknown. In the present study, we found that SH2-containing inositol 5'-phosphatase 2 (SHIP2), a negative regulator of phosphatidylinositol 3,4,5-trisphosphate-mediated signals, is widely expressed in adult mouse brain. When a dominant-negative mutant of SHIP2 was expressed in cultured neurons, insulin signaling was augmented, indicating physiological significance of endogenous SHIP2 in neurons. Interestingly, SHIP2 mRNA and protein expression levels were significantly increased in the brain of type 2 diabetic db/db mice. To investigate the impact of increased expression of SHIP2 in the brain, we further employed transgenic mice overexpressing SHIP2 and found that increased amounts of SHIP2 induced the disruption of insulin/IGF-I signaling through Akt. Neuroprotective effects of insulin and IGF-I were significantly attenuated in cultured cerebellar granule neurons from SHIP2 transgenic mice. Consistently, terminal deoxynucleotide transferase-mediated dUTP nick end labeling assay demonstrated that the number of apoptosis-positive cells was increased in cerebral cortex of the transgenic mice at an elderly age. Furthermore, SHIP2 transgenic mice exhibited impaired memory performance in the Morris water maze, step-through passive avoidance, and novel-object-recognition tests. Importantly, inhibition of SHIP2 ameliorated the impairment of hippocampal synaptic plasticity and memory formation in db/db mice. These results suggest that SHIP2 is a potent negative regulator of insulin/IGF-I actions in the brain, and excess amounts of SHIP2 may be related, at least in part, to brain dysfunction in insulin resistance with type 2 diabetes.