Type 2 diabetes mellitus (T2DM) is associated with a nearly 2-fold increased risk of Alzheimer's disease (AD) development although the reasons for this are unknown. Recent studies have reported dysregulated hippocampal neurogenesis in AD patients during postmortem examinations. Additionally, impaired neurogenesis has been observed in T2DM mouse models, suggesting this could explain the connection between T2DM and AD. This study aims to investigate how exposure to fatty acids associated with T2DM affects neuronal differentiation, serving as a model of neurogenesis. Human SH-SY5Y neuroblastoma cells were subjected to a 10-day differentiation protocol involving retinoic acid and brain-derived neurotrophic factor. Cells were exposed to a physiologically relevant dose of oleic or palmitic acid (OA or PA; the most abundant monosaturated and saturated fatty acids respectively in plasma and shown to be elevated in T2DM and AD). Morphology, differentiation, and signalling markers were evaluated through Western Blotting and confocal microscopy. Chronic PA, but not OA treatment decreased pre- and post-synaptic markers and induced morphological abnormalities. Mechanistically, PA decreased phosphorylation of Akt and CDK5/p35 expression, implying that these developmental effects may be mediated by reductions in CDK5 and Akt signalling. The effect on Akt signalling suggests a link between insulin resistance and impaired neurogenesis in T2DM. Overall, our data suggest that chronic exposure to PA affects the differentiation of SH-SY5Y cells, providing a potential link between T2DM, high fat diet and AD. Future investigations will focus on rescuing the mechanistic effects of PA and will explore the effects of PA on AD pathology.