This study investigated the effects of alcoholic extract of Bacopa monnieri (L.) Wettst. (BM) on cognitive deficits using olfactory bulbectomized (OBX) mice and the underlying molecular mechanisms of its action. OBX mice were treated daily with BM (50 mg/kg, p.o.) or a reference drug, tacrine (2.5 mg/kg, i.p.), 1 week before and continuously 3 days after OBX. Cognitive performance of the animals was analyzed by the novel object recognition test, modified Y maze test, and fear conditioning test. Brain tissues of OBX animals were used for neurochemical and immunohistochemical studies. OBX impaired non-spatial short-term memory, spatial working memory, and long-term fair memory. BM administration ameliorated these memory disturbances. The effect of BM on short-term memory deficits was abolished by a muscarinic receptor antagonist, scopolamine. OBX downregulated phosphorylation of synaptic plasticity-related signaling proteins: NR1 subunit of N-methyl-D-aspartate receptor, glutamate receptor 1 (GluR1), and calmodulin-dependent kinase II but not cyclic AMP-responsive element binding protein (CREB), and reduced brain-derived neurotrophic factor (BDNF) mRNA in the hippocampus. OBX also reduced choline acetyltransferase in the hippocampus and cholinergic neurons in the medial septum, and enlarged the size of lateral ventricle. BM administration reversed these OBX-induced neurochemical and histological alterations, except the decrease of GluR1 phosphorylation, and enhanced CREB phosphorylation. Moreover, BM treatment inhibited ex vivo activity of acetylcholinesterase in the brain. These results indicate that BM treatment ameliorates OBX-induced cognition dysfunction via a mechanism involving enhancement of synaptic plasticity-related signaling and BDNF transcription and protection of cholinergic systems from OBX-induced neuronal damage.