The present study was undertaken to investigate possible mechanism of pioglitazone-induced beneficial effect in memory deficits associated with experimental dementia. Dementia was induced in Swiss albino mice by administration of streptozotocin (STZ; 3 mg/kg administered intracerebroventricularly on 1st & 3rd day). Morris Water-Maze test was employed to assess learning and memory of the animals. Brain acetylcholinesterase (AChE) activity was measured by Ell Mann's method. Brain thiobarbituric acid reactive species (TBARS) levels and reduced glutathione (GSH) levels were measured by Ohokawa's and Beutler's method respectively to assess total oxidative stress. Blood glucose level was also measured. Streptozotocin (STZ) produced a significant decrease in water-maze performance of mice hence reflecting loss of learning and memory. Pioglitazone (20 mg/kg p.o. daily for 14 days) successfully attenuated STZ-induced memory deficits, without any significant per se effect on blood glucose levels. Higher levels of brain AChE activity, TBARS and lower levels of GSH were observed in STZ treated animals, which were significantly attenuated by pioglitazone. Further, the noted beneficial effect of pioglitazone on STZ-induced dementia was significantly abolished by pre-treatment of nitric oxide (NO) synthase inhibitor L-NAME (3 mg/kg i.p.) manifested in the terms of decrease in water-maze performance and increase in brain AChE activity as well as oxidative stress. It is concluded that anti-dementic effect of pioglitazone may involve central cholinergic, oxidative and NO pathways.