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Cyanobacteria comprise a good natural resource of a potential variety of neuro-chemicals, including acetylcholinesterase inhibitors essential for Alzheimer’s disease treatment. Accordingly, eight different cyanobacterial species were isolated, identified, and evaluated on their growth on different standard nutrient media. It was found that the modified Navicula medium supported the highest growth of the test cyanobacteria. The effects of methylene chloride/methanol crude extracts of the test cyanobacteria on acetylcholinesterase activity were examined and compared. Anabaena variabilis (KU696637.1) crude extract recorded the highest acetylcholinesterase inhibition (62 ± 1.3%). Navicula medium chemical components were optimized through a Plackett–Burman factorial design. The biomass of Anabaena variabilis increased significantly when grown on the optimized medium compared to that of control. The chemical analysis of the fractions derived from Anabaena variabilis showed the presence of two compounds in significant amounts: the flavonoid 5,7-dihydroxy-2-phenyl-4H-chrome-4-one and the alkaloid 4-phenyl-2-(pyridin-3-yl) quinazoline. Molecular docking studies revealed that both compounds interact with the allosteric binding site of acetylcholinesterase at the periphery with π-π stackings with Tyr341 and Trp286 with good, predicted partition coefficient. The compounds obtained from this study open the door for promising drug candidates to treat Alzheimer’s disease for their better pharmacodynamics and pharmacokinetic properties.