Apolipoprotein E is associated with age-related risk for Alzheimer's disease and plays critical roles in Aβ homeostasis. We report that ApoE plays a role in facilitating the proteolytic clearance of soluble Aβ from the brain. The endolytic degradation of Aβ peptides within microglia by neprilysin and related enzymes is dramatically enhanced by ApoE. Similarly, Aβ degradation extracellularly by insulin-degrading enzyme is facilitated by ApoE. The capacity of ApoE to promote Aβ degradation is dependent upon the ApoE isoform and its lipidation status. The enhanced expression of lipidated ApoE, through the activation of liver X receptors, stimulates Aβ degradation. Indeed, aged Tg2576 mice treated with the LXR agonist GW3965 exhibited a dramatic reduction in brain Aβ load. GW3965 treatment also reversed contextual memory deficits. These data demonstrate a mechanism through which ApoE facilitates the clearance of Aβ from the brain and suggest that LXR agonists may represent a novel therapy for AD.