Alzheimer's disease (AD) is a neurodegenerative disease characterized by amyloid-beta (Aβ) aggregation, neuroinflammation, oxidative stress, and dysfunction in the mitochondria and cholinergic system. In this study, the synthesis of chitosan-polylactic acid-loaded magnesium oxide nanocomposite (CH/PLA/MgONCs) was examined using the green precipitation method. The synthesized CH/PLA/MgONCs were confirmed by using the UV-Vis spectrum, FT-IR, SEM-EDAX, and physical properties. The experiments were carried out using male Wistar rats by injecting streptozotocin (STZ) bilaterally into the brain's ventricles through the intracerebroventricular (ICV) route at a dose of 3 mg/kg. We also evaluated the effects of CH/PLA/MgONCs at doses of 10 mg/kg. To assess the cognitive dysfunction induced by ICV-STZ, we performed behavioral, biochemical, and histopathological analyses. In our study results, UV-Vis spectrum analysis of CH/PLA/MgONCs showed 285 nm, FT-IR analyses confirmed that the various functional groups were present, and SEM-EDAX analysis confirmed that a cauliflower-like spherical shape, Mg and O were present. Treatment with CH/PLA/MgONCs (10 mg/kg) showed a significant improvement in spatial and non-spatial memory functions. This was further supported by biochemical analysis showing improved antioxidant enzyme (GSH, SOD, CAT, and GPx activity) activities that significantly attenuated cholinergic activity and oxidative stress. In the CH/PLA/MgONCs-treated group, significant improvement was observed in the mitochondrial complex activity. ICV-STZ-induced neuroinflammation, as indicated by increased levels of TNF-α, IL-6, and CRP, was significantly reduced by CH/PLA/MgONCs treatment. Additionally, CH/PLA/MgONCs treated histological results showed improved healthy neuronal cells in the brain. Furthermore, in silico studies confirm that these molecules have good binding affinity and inhibit Aβ aggregation. In conclusion, CH/PLA/MgONCs treatment reversed AD pathology by improving memory and reducing oxidative stress, neuroinflammation, and mitochondrial dysfunction. These findings recommend that CH/PLA/MgONCs are possible therapeutic agents to treat AD.