Alzheimer's disease (AD) is characterized by the extracellular deposition of β-amyloid fibrils within the brain and the subsequent association and phenotypic activation of microglial cells associated with the amyloid plaque. The activated microglia mount a complex local proinflammatory response with the secretion of a diverse range of inflammatory products. Nonsteroidal anti-inflammatory drugs (NSAIDs) are efficacious in reducing the incidence and risk of AD and significantly delaying disease progression. A recently appreciated target of NSAIDs is the ligand-activated nuclear receptor peroxisome proliferator-activated receptor γ (PPARγ). PPARγ is a DNA-binding transcription factor whose transcriptional regulatory actions are activated after agonist binding. We report that NSAIDs, drugs of the thiazolidinedione class, and the natural ligand prostaglandin J2 act as agonists for PPARγ and inhibit the β-amyloid-stimulated secretion of proinflammatory products by microglia and monocytes responsible for neurotoxicity and astrocyte activation. The activation of PPARγ also arrested the differentiation of monocytes into activated macrophages. PPARγ agonists were shown to inhibit the β-amyloid-stimulated expression of the cytokine genes interleukin-6 and tumor necrosis factor α. Furthermore, PPARγ agonists inhibited the expression of cyclooxygenase-2. These data provide direct evidence that PPARγ plays a critical role in regulating the inflammatory responses of microglia and monocytes to β-amyloid. We argue that the efficacy of NSAIDs in the treatment of AD may be a consequence of their actions on PPARγ rather than on their canonical targets the cyclooxygenases. Importantly, the efficacy of these agents in inhibiting a broad range of inflammatory responses suggests PPARγ agonists may provide a novel therapeutic approach to AD.