Abstract: Inflammation plays a crucial role in the initiation and progression of sepsis and induces alterations in brain neurotransmission, thereby contributing to the development of sepsis-associated encephalopathy (SAE). Parvalbumin (PV) interneurons are pivotal contributors to cognitive processes and have been implicated in various central nervous system dysfunctions, including SAE. Oxytocin, known for its ability to augment the firing rate of gamma-aminobutyric acid (GABA)-ergic interneurons and directly stimulate inhibitory interneurons to enhance the tonic inhibition of pyramidal neurons, has prompted an investigation into its potential therapeutic effects on cognitive dysfunction in SAE. In the current study, we administered intranasal oxytocin to SAE mice induced by lipopolysaccharide. Behavioral assessments, including open field, Y-maze, and fear conditioning, were used to evaluate cognitive performance. Golgi staining revealed hippocampal synaptic deterioration, local field potential recordings showed weakened gamma oscillations, and immunofluorescence staining demonstrated decreased PV expression in the cornu ammonis 1 (CA1) region of the hippocampus following lipopolysaccharide treatment, all of which were alleviated by oxytocin administration. Furthermore, immunofluorescence staining of PV co-localization with vesicular glutamate transporter 1 or vesicular GABA transporter indicated a balanced excitation/inhibition effect of neurotransmitters on PV interneurons after oxytocin administration in the SAE mice, leading to an improved cognitive function. In conclusion, oxytocin treatment improved cognitive function by increasing the number of PV⁺ neurons in the hippocampal CA1 region, restoring the balance of excitatory/inhibitory synaptic transmission on PV interneurons, and enhancing hippocampal CA1 local field potential gamma oscillations. These findings suggest a potential mechanism underlying the beneficial effects of oxytocin in SAE.