Alzheimer's disease (AD) is one of the untreatable neurodegenerative disorders with associated societal burden. Current therapies only provide symptomatic relief without altering the rate of disease progression as reported by Lanctot et al. (Therapeutic Advances in Neurological Disorders 2 (3):163-180, 2009). The increased number of failed clinical trials in last two decades indicates the imperative need to explore alternative therapies for AD as reported by Tuszynski et al. (Nature Medicine 11 (5):551-555, 2005) and Liyanage et al. (Alzheimer's & Dementia 4:628-635, 2005). In this study, we aimed to decipher the role of neurotrophic factors in the reversal of memory loss by transplantation of lineage negative (Lin-ve) stem cells in a male mouse model of cognitive impairment induced by intrahippocampal injection of amyloid β-42 (Aβ-42). The efficacy of human umbilical cord blood (hUCB) derived Lin-ve stem cells were analyzed by neurobehavioral parameters, i.e., Morris water maze and passive avoidance after bilateral intra-hippocampal transplantation using stereotaxic surgery. Real-time PCR and immunohistochemistry was carried out in brain tissues in order to analyze the expression of neurotrophic factors, apoptotic, astrocytic, and other neuronal cell markers. The transplantation of Lin-ve stem cells led to reversal of memory loss associated with reduction of Aβ-42 deposition from the brains. The molecular analysis revealed increase in neurotrophic factors, i.e., glial derived neurotrophic factor (GDNF), ciliary derived neurotrophic factor (CNTF), and Brain-derived neurotrophic factor (BDNF) after transplantation. The administration of ANA-12, a TrkB inhibitor, reversed the behavioral and molecular effects of stem cell transplantation suggesting involvement of BDNF-TrkB pathway in the rescue of memory loss. We believe that the amyloid clearance results from activation of astrocytes and anti-apoptotic pathways added by neurotrophic factors.