Genetic, neuropathological, and biochemical studies have provided strong evidence for a central role of amyloid in the pathogenesis of Alzheimer's disease (AD). We have proposed previously that peptides designed as β‐sheet breakers may be useful in preventing the formation of amyloid plaques. In this study, we describe a modified β‐sheet breaker peptide with improved pharmacological properties, a high rate of penetration across the blood‐brain barrier, and the ability to induce a dramatic reduction in amyloid deposition in two different transgenic AD models. In addition, we report for the first time a significant increase in neuronal survival and a decrease in brain inflammation associated with the reduction of amyloid plaques. These results demonstrate that the process of amyloid deposition is one of the causes of neurodegeneration in AD. Moreover, our findings indicate that β‐sheet breaker peptides provide a valuable tool for evaluating further the importance of amyloid in the etiology of AD and suggest that these peptides or some of their derivatives might be good candidates for AD treatment.