Recent work has suggested that exercise may be beneficial in preventing or ameliorating symptoms of several neurological disorders, although the mechanism is not entirely understood. The current study was designed to examine the potential beneficial effect of treadmill exercise upon cognitive function in a streptozotocin (STZ)-induced rat model of Alzheimer’s disease (AD). Animals underwent treadmill exercise (30 min/day, 5 days/week) for 4 weeks after bilateral STZ intracerebroventricular injection (2.4 mg/kg). We demonstrated that treadmill exercise significantly attenuated STZ-induced neurodegeneration in the rat hippocampal CA1 region and strongly preserved hippocampal-dependent cognitive functioning. Further mechanistic investigation displayed a marked suppression of STZ-induced amyloid-β accumulation and tau phosphorylation. Intriguingly, treadmill exercise remarkably inhibited reactive gliosis following STZ insult and effectively shifted activated microglia from a pro-inflammatory M1 to an anti-inflammatory M2 phenotype, which was correlated with a significantly reduced expression of pro-inflammatory mediators and a corresponding enhancement of anti-inflammatory cytokine expression in the hippocampus. Furthermore, treadmill exercise caused a robust suppression of oxidative damage as evidenced by significantly reduced peroxynitrite production, lipid peroxidation, and oxidized DNA damage. Finally, treadmill exercise strongly attenuated STZ-induced mitochondrial dysfunction manifested by a dramatically elevated intra-mitochondrial cytochrome c oxidase activity and ATP synthesis, and markedly inhibited neuronal apoptosis in the hippocampus. These findings demonstrate that treadmill exercise has a multifactorial effect to attenuate many of the pathological processes that play a key role in AD, and provide further support for the beneficial role of exercise as a potential therapeutic option in AD treatment.