To investigate the mechanism of Huannao Yicong Decoction (HYD) extract on improving of learning memory of transgenic amyloid precursor protein (APP)/presenilin 1 (PS1) mice, we randomly divided 60 transgenic APP/PS1 mice of 3 months old into 4 groups: the model group, the Donepezil group, the HYD-L group, and the HYD-H group, with 15 C57BL/6J mice of the same genetic background as the control group. These mice were gavaged for 6 months in a row. The results showed that the latency was significantly shortened and the number of passing through the original platform was increased. HYD extract can increase the amount of neurons and improve the morphological structure of Nissl body obviously. The γ-secretase activity and the expression of phosphorylated APP, Aβ1-40, and Aβ1-42 in hippocampal CA1 were significantly decreased. The expressions of protein and mRNA of PEN-2 and CREB in hippocampal were significantly downregulated. These results demonstrated that HYD extract can improve the memory ability of transgenic APP/PS1 mice, which was related to the protection of neurons and structure of Nissl body, reducing cleavage of APP and production of Aβ and inhibiting the activity of γ-secretase by decreasing CREB activity because of downregulated expression of PEN-2.