Stem-cell-based therapy is very promising for Alzheimer’s disease (AD), yet has not become a reality. A critical challenge is the transplantation microenvironment, which impacts the therapeutic effect of stem cells. In AD brains, amyloid-beta (Aβ) peptides and inflammatory cytokines continuously poison the tissue microenvironment, leading to low survival of grafted cells and restricted efficacy. It is necessary to create a growth-supporting microenvironment for transplanted cells. Recent advances in AD studies suggest that the asparaginyl endopeptidase (AEP) is a potential intervention target for modifying pathological changes. We here chose APP/PS1 mice as an AD model and employed pharmacological inhibition of the AEP for one month to improve the brain microenvironment. Thereafter, we transplanted neural stem cells (NSCs) into the hippocampus and maintained therapy for one more month. We found that inhibition of AEPs resulted in a significant decrease of Aβ, TNF-α, IL-6 and IL-1β in their brains. In AD mice receiving NSC transplantation alone, the survival of NSCs was at a low level, while in combination with AEP inhibition pre-treatment the survival rate of engrafted cells was doubled. Within the 2-month treatment period, implantation of NSCs plus pre-inhibition of the AEP significantly enhanced neural plasticity of the hippocampus and rescued cognitive impairment. Neither NSC transplantation alone nor AEP inhibition alone achieved significant efficacy. In conclusion, pharmacological inhibition of the AEP ameliorated brain microenvironment of AD mice, and thus improved the survival and therapeutic efficacy of transplanted stem cells.