Sepsis-associated encephalopathy (SAE) is a frequent and severe complication of sepsis, affecting up to 70% of patients and significantly increasing morbidity and mortality. Characterized by a spectrum of neurological dysfunctions ranging from delirium to coma, SAE occurs in the absence of direct central nervous system infection. Its pathophysiology is multifactorial, involving neuroinflammation, blood-brain barrier disruption, neurotransmitter imbalance, mitochondrial dysfunction, and cerebral hypoperfusion. The hippocampus and cortical areas are especially vulnerable, contributing to persistent cognitive deficits in survivors. Inflammatory mediators, oxidative stress, and impaired cerebral autoregulation play key roles in the disease process, leading to functional and structural alterations in the brain. Diagnosis remains clinical and is often one of exclusion, with neuroimaging and transcranial Doppler offering supportive but non-specific findings. SAE is underdiagnosed, partly due to sedative use in ICU settings, and lacks targeted therapies. Currently, there are no disease-specific treatments: management focuses on sepsis source control and supportive neurological care, while emerging strategies explore immunomodulation, biomarkers, and gut microbiota interventions. However, emerging research is exploring the potential of immunomodulatory therapies, neuroprotective agents, and microbiome-targeted strategies. This review aims to integrate established pathophysiological concepts with novel research insights, highlighting evolving diagnostic tools and therapeutic opportunities for this complex, high-impact condition. However, emerging research is exploring the potential of immunomodulatory therapies, neuroprotective agents, and microbiome-targeted strategies. This review synthesizes current understanding and highlights innovative diagnostic and therapeutic approaches to this complex, high-impact condition.