Mesenchymal stem cell (MSC) therapy is a promising prospect for the treatment of Alzheimer's disease (AD); however, the underlying mechanisms by which MSCs mediate positive effects are still unclear. We speculated that MSCs mediate microglial autophagy and enhance the clearance of Aβ. To test this hypothesis, we cultured BV2 microglial cells with umbilical cord mesenchymal stem cells conditioned medium (ucMSCs-CM) in the presence or absence of Aβ25-35 oligomers. We investigated BV2 cell proliferation, cell death, and Aβ25-35 phagocytosis as well as protein expression levels of LC3, Beclin-1, p62, insulin-degrading enzyme (IDE), and neprilysin (Nep) with western blotting. The results showed that ucMSCs-CM inhibited the proliferation and decreased cell death of BV2 cells induced by Aβ25-35. ucMSCs-CM also promoted the phagocytosis of Aβ25-35 by BV2 cells and changed the expression of autophagy-related proteins LC3, Beclin-1, and p62. Treatment also upregulated the expression of Aβ-degrading enzymes IDE and Nep. Furthermore, the culture medium in BV2 cells with Aβ25-35 and ucMSCs-CM prevented neuronal cell SH-SY5Y from cell death compared to control medium without ucMSCs-CM. Altogether, these data suggested that ucMSCs-CM protect microglial and neuronal cells from Aβ25-35-induced cell death and promote Aβ phagocytosis by modulating autophagy and enhancing the expression of Aβ-degrading enzymes in microglia.