Recent studies suggest that transplantation of mesenchymal stem cells might have therapeutic effects in preventing pathogenesis of several neurodegenerative disorders. Adipose-derived mesenchymal stem cells (ADSCs) are a promising new cell source for regenerative therapy. However, whether transplantation of ADSCs could actually ameliorate the neuropathological deficits in Alzheimer's disease (AD) and the mechanisms involved has not yet been established. Here, we evaluated the therapeutic effects of intracerebral ADSC transplantation on AD pathology and spatial learning/memory of APP/PS1 double transgenic AD model mice. Results showed that ADSC transplantation dramatically reduced β-amyloid (Aβ) peptide deposition and significantly restored the learning/memory function in APP/PS1 transgenic mice. It was observed that in both regions of the hippocampus and the cortex there were more activated microglia, which preferentially surrounded and infiltrated into plaques after ADSC transplantation. The activated microglia exhibited an alternatively activated phenotype, as indicated by their decreased expression levels of proinflammatory factors and elevated expression levels of alternative activation markers, as well as Aβ-degrading enzymes. In conclusion, ADSC transplantation could modulate microglial activation in AD mice, mitigate AD symptoms, and alleviate cognitive decline, all of which suggest ADSC transplantation as a promising choice for AD therapy. This manuscript is published as part of the International Association of Neurorestoratology (IANR) supplement issue of Cell Transplantation.