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Activation of microglial cells by intrinsic or extrinsic insult causes neuroinflammation, a common phenomenon in neurodegenerative diseases. Prevention of neuroinflammation may ameliorate many neurodegenerative disease progressions. <i>Dioscorea nipponica</i> Makino (DN) extract can alleviate muscular atrophy and inflammatory diseases; however, the efficacy and mechanism of action in microglial cells remain unknown. The current study investigates the possible anti-inflammatory effects and mechanisms of <i>Dioscorea nipponica</i> Makino ethanol extract and its steroidal saponin dioscin. Our in vitro study shows that <i>Dioscorea nipponica</i> rhizome ethanol extract (DNRE) and dioscin protect against lipopolysaccharide (LPS)-activated inflammatory responses in BV-2 microglial cells by inhibiting phosphorylation and the nuclear translocation of nuclear factor kappa-light-chain-enhancer of activated B cells (NF-κB), resulting in the downregulation of pro-inflammatory cytokines and enzymes. Consistent with our previous report of dioscin-mediated enhancement of neurotrophic factors in dopaminergic cells, here we found that dioscin upregulates brain-derived neurotrophic factor (BDNF) and cAMP-response element binding protein (CREB) phosphorylation (pCREB) in the cerebral cortex and hippocampus regions of the mouse brain. Scopolamine treatment increased pro-inflammatory enzyme levels and reduced the expression of BDNF and pCREB in the hippocampus and cortex regions, which led to impaired learning and referencing memory in mice. Pre-treatment of dioscin for 7 days substantially enhanced mice performances in maze studies, indicating amelioration in cognitive deficits. In conclusion, DNRE and its active compound dioscin protect against neurotoxicity most likely by suppressing NF-κB phosphorylation and upregulating neurotrophic factor BDNF.