The pathological hallmarks of Alzheimer's disease (AD) include amyloid-β (Aβ) accumulation, neurofibrillary tangle formation, synaptic dysfunction, and neuronal loss. The present study was performed to investigate the protective effects and mechanism of action of a prosaposin-derived 18-mer peptide (PS18: LSELIINNATEELLIKGL) on mice hippocampal progenitor cell proliferation, neurogenesis, and memory tasks after intracerebroventricular injection of Aβ1-42 peptide. Seven days after Aβ1-42 injection, significant proliferation of hippocampal progenitor cells and memory impairment were evident. Two weeks after Aβ1-42 peptide injection, elevated numbers of surviving 5-bromo-2-deoxyuridine cells and newly formed neurons were detected. Treatment with PS18 attenuated these effects evoked by Aβ1-42. Our data indicate that treatment with PS18 partially attenuated the increase in hippocampal neurogenesis caused by Aβ1-42-induced neuroinflammation and prevented memory deficits associated with increased numbers of activated glial cells. We observed an increase in ADAM10 and decreases in BACE1, PS1/2, and AβPP protein levels, suggesting that PS18 enhances the nonamyloidogenic AβPP cleavage pathway. Importantly, our results further showed that PS18 activated the PI3K/Akt pathway, phosphorylated GSK-3α/β, and, as a consequence, exerted a neuroprotective effect. In addition, PS18 showed a protective effect against Aβ1-42-induced neurotoxicity via suppression of the caspase pathway; upregulation of Bcl-2; downregulation of BAX, attenuating mitochondrial damage; and inhibition of caspase-3. These findings suggest that PS18 may provide a valuable therapeutic strategy for the treatment of progressive neurodegenerative diseases, such as AD.