High fat diet and certain dietary patterns are associated with higher incidence of sporadic Alzheimer’s disease (AD) and cognitive decline. However, no specific therapy has been suggested to ameliorate the negative effects of high fat/high cholesterol levels on cognition and amyloid pathology. Here we show that in 9 month old APP23 mice, a high fat/high cholesterol (HF) diet provided for 4 months exacerbates the AD phenotype evaluated by behavioral, morphological and biochemical assays. To examine the therapeutic potential of Liver X Receptor (LXR) ligands, APP23 mice were fed HF diet supplemented with synthetic LXR agonist T0901317 (T0). Our results demonstrate that LXR ligand treatment causes a significant reduction of memory deficits observed during both acquisition and retention phases of the Morris Water Maze. Moreover, the effects of T0 on cognition correlate with AD-like morphological and biochemical parameters. We found a significant decrease in amyloid plaque load, insoluble Aβ and soluble Aβ oligomers. In vitro experiments with primary glia demonstrated that Abca1 is essential for the proper lipidation of ApoE and mediates the effects of T0 on Aβ degradation by microglia. Microdialysis experiments performed on awake freely moving mice showed that T0 decreased Aβ level in the interstitial fluid of the hippocampus, supporting the conclusion that this treatment increases Aβ clearance. The data presented conclusively shows that LXR activation in the context of a metabolic challenge has critical effects on AD phenotype progression by attenuating Aβ deposition and facilitating its clearance.