Alzheimer's disease (AD) is the most common neurodegenerative disorder in which neuroinflammation plays an important role. FLZ is a novel synthetic derivative of natural squamosamide. Previous studies demonstrated that FLZ had neuroprotective effects on AD models and showed strong anti-inflammatory property in Parkinson's disease models. However, whether the neuroprotective effects of FLZ on AD are associated with its anti-inflammatory property is still not fully elucidated. In this study, we aimed to investigate the ability of FLZ in modulating inflammation. The results showed that FLZ significantly improved memory deficits and alleviated neuronal damage as well as neuronal loss in the hippocampus of mice intracerebroventricular injected with lipopolysaccharide (LPS). Mechanistic studies revealed that the neuroprotective effects of FLZ were due to the suppression of neuroinflammation induced by LPS, as indicated by inactivation of astrocytes and microglia, reduced production of tumor necrosis factor-α, interleukin-1β, and nitric oxide, as well as decreased expression of cyclooxygenase-2 and inducible nitric oxide synthase. The beneficial effects of FLZ on AD were further supported by the finding that FLZ attenuated β-amyloid production through inhibiting β-amyloid precursor protein cleaving enzyme 1 expression. These results suggested that anti-inflammatory agent could be useful for the treatment of AD.