Alzheimer's disease (AD) is the leading cause of dementia in the elderly. Although the etiology of AD remains unclear, microglia-mediated neuroinflammation is believed to play an important role in its pathogenesis. Microglial activation occurs in AD and is characterized by apparent phagocytic activity and by increased production and secretion of several cytokines, chemokines, reactive oxygen and nitrogen species, prostaglandin (PG)E2, and neurotrophic factors. Microglial activation can be neuroprotective through the release of neurotrophic factors and by phagocytosing Abeta, a critical neurotoxic component in AD brain. Concurrently, microglial activation causes elevated inflammatory responses that lead to paracrine damage to neurons. Therefore, a well-controlled microglial activation that diminishes microglial-mediated oxidative damage while promoting neuronal protection may be the key for AD therapy. Peroxisome proliferator-activated receptor gamma (PPARgamma) has recently gained increasing attention in AD due to its function as a molecular target for non-steroidal anti-inflammatory drugs (NSAIDs). In this review, we will discuss the role of PPARgamma in microglial innate immunity in AD and how pharmacological manipulation of microglial activation using PPARgamma ligands might facilitate the treatment of AD.