Amyloid beta (Aβ) peptide is closely related to the onset of Alzheimer’s disease (AD). A high-cholesterol or high-energy diet was demonstrated to stimulate Aβ formation and deposition in the amyloid precursor protein (APP) pathway and, oppositely, downregulate the secretion of the neuroprotective soluble APP α-fragment (sAPPα). Monascus-fermented red mold rice (RMR) including multiple cholesterol-lowering agents, antioxidants, and anti-inflammatory agents has been proven to ameliorate Aβ40 infusion-induced memory deficit in our previous study. In this study, the ethanol extract of RMR (RE) and natural RMR were respectively tested for their effect on the mediation of the proteolytic process of APP in cholesterol-treated human neuroblastoma IMR32 cell, as well as their effect on memory and learning ability and the expression of AD risk factors in intracerebroventricular Aβ40-infused hyperlipidemic rats. In the results, RE suppressed cholesterol-raised β-secretase activity and further resulted in the increase of sAPPα secretion in the IMR32 cell. In the animal test, RMR potently reversed the memory deficit in the water maze and passive avoidance tasks. RMR administration could prevent against Aβ40 infusion plus the great damage caused by a high energy diet in hippocampus and cortex involved in the raise of thiobarbituric acid reactive substances and reactive oxygen species. The neuroprotection provided by RMR downregulates Aβ40 formation and deposition by suppressing the cholesterol-raised β-secretase activity and apolipoprotein E expression, as well as mediates the proteolytic process of APP toward neuroprotective sAPPα secretion in hippocampus.