The prognostic utility of plasma endotoxemia, marked by elevated lipopolysaccharide (LPS) and often associated with gut barrier dysfunction, remains undefined in acute ischemic stroke (AIS) patients with type 2 diabetes. In this single-center prospective cohort of 300 AIS patients with diabetes, we measured early admission plasma LPS and assessed its correlation with stroke severity and inflammatory markers, and its independent association with 90-day unfavorable functional outcome (modified Rankin Scale 3-6). Compared to the good outcome group, patients with poor outcomes had significantly higher LPS levels. Log-transformed LPS levels positively correlated with baseline NIHSS score, high-sensitivity C-reactive protein, and white blood cell count. After multivariable adjustment for age, NIHSS, HbA1c, atrial fibrillation, estimated glomerular filtration rate, and other covariates, each standard deviation increase in log-LPS was independently associated with an increased risk of 90-day unfavorable outcome (odds ratio 1.86, 95% CI 1.39-2.48). A clear dose-response relationship was observed, with the risk of poor outcome and mortality rising across LPS quartiles. Adding LPS to a basic clinical prediction model improved the area under the curve from 0.79 to 0.83, enhanced risk reclassification, and provided greater net clinical benefit across a range of decision thresholds. In conclusion, early admission plasma endotoxemia is an independent predictor of 90-day functional outcome in AIS patients with diabetes and improves conventional risk stratification. This finding positions LPS as a clinically accessible biomarker that is associated with poor recovery in acute ischemic stroke.