A number of epidemiological studies have established a link between Alzheimer's disease (AD) and diabetes mellitus (DM). So, nuclear receptor peroxisome proliferator-activated receptor gamma (PPAR gamma) plays an important role in the treatment of AD. However, current PPAR gamma-targeting drugs such as thiazolidinediones (TZDs) are associated with undesirable side effects. We identified herbal extract with a small molecular, astragaloside IV (AS-IV), as a selective PPAR gamma natural agonist in nervous cells by developing a PPAR-PPRE pathway regulatory system. Cultured SH-SY5Y cells transfected with pEGFP-N1-BACE1 were treated with AS-IV for 24 h or AS-IV plus the PPAR-gamma antagonist GW9662 in vitro. APP/PS1 mice were intragastrically treated with AS-IV or AS-IV plus the GW9662 every 48 h for 3 months. Immunofluorescence, western blotting, and real-time PCR were used to examine the expression of PPAR gamma and BACE1. Immunohistochemical staining was performed to analyze the distribution of A beta plaques in the APP/PS1 mouse brain. The levels of A beta were determined using ELISA kits. AS-IV was shown to be a PPAR gamma agonist by establishing a high-throughput screening model for PPAR gamma agonists. The results showed that AS-IV treatment increased activity of PPAR gamma and inhibited BACE1 in vitro. As a result, A beta levels decreased significantly. GW9662, which is a PPAR gamma antagonist, significantly blocked the beneficial role of AS-IV. In vivo, AS-IV treatment increased PPAR gamma and BACE1 expression and reduced neuritic plaque formation and A beta levels in the brains of APP/PS1 mice. These effects of AS-IV could be effectively inhibited by GW9662. These results indicate that AS-IV may be a natural PPAR gamma agonist that suppressed activity of BACE1 and ultimately attenuates generation of A beta. Therefore, AS-IV may be a promising agent for modulating A beta-related pathology in AD.