Recent studies show that intracellular cholesterol levels can modulate the processing of amyloid precursor protein to Abeta peptide. Moreover, cholesterol-rich apoE-containing lipoproteins may also promote Abeta clearance. Agonists of the liver X receptor (LXR) transcriptionally induce genes involved in intracellular lipid efflux and transport, including apoE. Thus, LXR agonists have the potential to both inhibit APP processing and promote Abeta clearance. Here we show that LXR agonist, TO901317, increased hippocampal ABCA1 and apoE and decreased Abeta42 levels in APP transgenic mice. TO901317 had no significant effects on levels of Abeta40, full length APP, or the APP processing products. Next, we examined the effects of TO901317 in the contextual fear conditioning paradigm; TO901317 completely reversed the contextual memory deficit in these mice. These data demonstrate that LXR agonists do not directly inhibit APP processing but rather facilitate the clearance of Abeta42 and may represent a novel therapeutic approach to Alzheimer's disease.