Alzheimer's disease (AD) is associated with beta-amyloid deposition, glial activation, and increased levels of the cytokines, as well as cholinergic dysfunction. Liver X receptor (LXR) has been found to inhibit the expression of pro-inflammatory genes. However, the effects of LXR activation on inflammatory response and on cholinergic system in AD are not yet clear. The present results revealed that LXR activation markedly attenuated several inflammatory markers and decreased microglial activation and reactive astrocytes in amyloid precursor protein (APP)/PS1 transgenic mice. Additionally, LXR activation significantly increased the number of cholinergic neurons in the medial septal regions and the basal nucleus of Meynert (NBM), and attenuated cognitive impairment. Furthermore, we observed that LXR activation inhibited the production of COX-2 and iNOS from Aβ_25–35-induced microglia. LXR activation and nuclear factor kappa B (NF-κB) inhibitor PDTC both attenuated Aβ_25–35 induction of NF-κB activation. These results suggest that LXR agonists suppress the production of pro-inflammatory molecules, at least in part, by modulating NF-κB-signaling pathway. Collectively, these studies suggest that LXR agonists may have therapeutic significance in AD.