Alzheimer's disease (AD) without cure remains as a serious health issue in the modern society. The major neuropathological alterations in AD are characterized by chronic neuroinflammation and neuronal loss due to neurofibrillary tangles (NFTs) of abnormally hyperphosphorylated tau, plaques of β-amyloid (Aβ) and various metabolic dysfunctions. Due to the multifaceted nature of AD pathology and our limited understanding on its etiology, AD is difficult to be treated with currently available pharmaceuticals. This unmet need, however, could be met with stem cell technology that can be engineered to replace neuronal loss in AD patients. Although stem cell therapy for AD is only in its development stages, it has vast potential uses ranging from replacement therapy to disease modelling and drug development. Current progress with stem cells in animal model studies offers promising results for the new prospective treatment for AD. This review will discuss the characteristics of AD, current progress in stem cell therapy and remaining challenges and promises in its development.