Stem cell-based therapy is a potential treatment for neurodegenerative diseases, but its application to Alzheimer's disease (AD) remains limited. Brain-derived neurotrophic factor (BDNF) is critical in the pathogenesis and treatment of AD. Here, we present a novel therapeutic approach for AD treatment using BDNF-overexpressing neural stem cells (BDNF-NSCs). In vitro, BDNF overexpression was neuroprotective to beta-amyloid-treated NSCs. In vivo, engrafted BDNF-NSCs-derived neurons not only displayed the Ca(2+)-response fluctuations, exhibited electrophysiological properties of mature neurons and integrated into local brain circuits, but recovered the cognitive deficits. Furthermore, BDNF overexpression improved the engrafted cells' viability, neuronal fate, neurite complexity, maturation of electrical property and the synaptic density. In contrast, knockdown of the BDNF in BDNF-NSCs diminished stem cell-based therapeutic efficacy. Together, our findings indicate BDNF overexpression improves the therapeutic potential of engrafted NSCs for AD via neurogenic effects and neuronal replacement, and further support the feasibility of NSC-based ex vivo gene therapy for AD.