BACKGROUND: The mechanistic effects of gamma transcranial alternating current stimulation (tACS) on hippocampal gamma oscillation activity in Alzheimer's Disease (AD) remains unclear. This study aimed to clarify beneficial effects of gamma tACS on cognitive functioning in AD and to elucidate effects on hippocampal gamma oscillation activity. METHODS: This is a double-blind, randomized controlled single-center trial. Participants with mild AD were randomized to tACS group or sham group, and underwent 30 one-hour sessions of either 40 Hz tACS or sham stimulation over consecutive 15 days. Cognitive functioning, structural magnetic resonance imaging (MRI), and simultaneous electroencephalography-functional MRI (EEG-fMRI) were evaluated at baseline, the end of the intervention and at 3-month follow-up from the randomization. RESULTS: A total of 46 patients were enrolled (23 in the tACS group, 23 in the sham group). There were no group differences in the change of the primary outcome, 11-item cognitive subscale of the Alzheimer's Disease Assessment Scale (ADAS-Cog) score after intervention (grouptime, p = 0.449). For secondary outcomes, compared to the control group, the intervention group showed significant improvement in MMSE (grouptime, p = 0.041) and MoCA scores (non-parametric test, p = 0.025), which were not sustained at 3-month follow-up. We found an enhancement of theta-gamma coupling in the hippocampus, which was positively correlated with improvements of MMSE score and delayed recall. Additionally, fMRI revealed increase of the local neural activity in the hippocampus. CONCLUSION: Effects on the enhancement of theta-gamma coupling and neural activity within the hippocampus suggest mechanistic models for potential therapeutic mechanisms of tACS. TRIAL REGISTRATION: ClinicalTrials.gov, NCT03920826; Registration Date: 2019-04-19.