Patients with Alzheimer's disease (AD) or dementia are increasing in numbers as the population worldwide ages. Mid-life psychological stress, psychosocial stress and posttraumatic stress disorder have been shown to cause cognitive dysfunction and lead to increased risk for dementia. The mechanisms behind stress-induced AD or dementia are not known. Solid amyloid plaques in the affected brain tissues characterize AD. However, over the last decade it has been concluded that the level of soluble beta-amyloid proteins (Aβ) are reliable diagnostic markers as they correlate to cognitive performance while plaques do not. The soluble Aβ accumulate intracellularly and disturb the synaptic function. In addition, it has been shown that the levels of intracellular Aβ depend on neuronal activity. Previous studies in animal models have shown that deceased neuronal activity cause increased levels of Aβ inside neurons and cognitive decline. Allopregnanolone is produced in the brain at stress. It enhances the activity of the GABAergic neurotransmission and affects neuronal activities. In a series of studies using in transgenic Alzheimer's disease model, we have shown that chronically elevated levels of allopregnanolone accelerated AD development. After a period of exposure to chronically elevated levels of allopregnanolone, impaired learning and memory pattern occurred in the AD mice. Accordingly, increased levels of β-amyloids were also observed in AD mice. We have also demonstrated that high levels of β-amyloids corresponded to dysfunction among brain synapses. This was seen after a period of chronically elevated levels of allopregnanolone, but not after placebo treatment. This effect of allopregnanolone treatment was identified early in the disease development when AD mice normally have intact memory function. This review covers a wide topic of neurosteroids and brain aging, and provides insight on the mechanisms behind stress-induced AD or dementia.