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This study aims to investigate whether magnolol (MG), a natural neolignane compound, can prevent AD induced by beta-amyloid (Aβ) and the possible mechanisms involved. MG dose-dependently reduces Aβ deposition, toxicity and memory impairment caused by Aβ in transgenic C. elegans. More importantly, these effects are reversed by GW9662, a selective peroxisome proliferator-activated receptor-γ (PPAR-γ) antagonist. MG is more effective in enhancing PPAR-γ luciferase levels than honokiol (HK). Meanwhile, MG has the potential to bind with the ligand binding domain of PPAR-γ (PPAR-γ-LBD). As expected, MG inhibited the luciferase activity of NF-κB and its target genes of inflammatory cytokines, and this effect was blocked by GW9662. The luciferase activity of Nrf2-ARE expression can be activated by MG and decreased Aβ-induced reactive oxygen species (ROS). The target gene LXR of PPAR-γ is activated by MG, which upregulates ApoE and promotes microglia phagocytosis and the degradation of Aβ, and these effects were also reversed by GW9662. In summary, MG can attenuate Aβ-induced AD and the underlying mechanism is the reduction of inflammation and promotion of phagocytosis and degradation of Aβ, which is dependent on PPAR-γ.