Tobacco smoking has been correlated with a lower incidence of Alzheimer's disease (AD). This negative correlation has been attributed to nicotine's properties. However, the undesired side-effects of nicotine and the absence of clear evidence of positive effects of this drug on the cognitive abilities of AD patients have decreased the enthusiasm for its therapeutic use. In this review, we discuss evidence showing that cotinine, the main metabolite of nicotine, has many of the beneficial effects but none of the negative side-effects of its precursor. Cotinine has been shown to be neuroprotective, to improve memory in primates as well as to prevent memory loss, and to lower amyloid-beta (Aβ)) burden in AD mice. In AD, cotinine's positive effect on memory is associated with the inhibition of Aβ aggregation, the stimulation of pro-survival factors such as Akt, and the inhibition of pro-apoptotic factors such as glycogen synthase kinase 3 beta (GSK3β). Because stimulation of the α7 nicotinic acetylcholine receptors (α7nAChRs) positively modulates these factors and memory, the involvement of these receptors in cotinine's effects are discussed. Because of its beneficial effects on brain function, good safety profile, and nonaddictive properties, cotinine may represent a new therapeutic agent against AD.