Complement factor C3 is the central component of the complement system and a key inflammatory protein activated in Alzheimer's disease (AD). Previous studies demonstrated that inhibition of C3 by overexpression of soluble complement receptor-related protein y in an AD mouse model led to reduced microgliosis, increased amyloid β (Aβ) plaque burden, and neurodegeneration. To further address the role of C3 in AD pathology, we generated a complement C3-deficient amyloid precursor protein (APP) transgenic AD mouse model (APP;C3^−/−). Brains were analyzed at 8, 12, and 17 months of age by immunohistochemical and biochemical methods and compared with age-matched APP transgenic mice. At younger ages (8–12 months), no significant neuropathological differences were observed between the two transgenic lines. In contrast, at 17 months of age, APP;C3^−/− mice showed significant changes of up to twofold increased total Aβ and fibrillar amyloid plaque burden in midfrontal cortex and hippocampus, which correlated with (1) significantly increased Tris-buffered saline (TBS)-insoluble Aβ₄₂ levels and reduced TBS-soluble Aβ₄₂ and Aβ₄₀ levels in brain homogenates, (2) a trend for increased Aβ levels in the plasma, (3) a significant loss of neuronal-specific nuclear protein-positive neurons in the hippocampus, and (4) differential activation of microglia toward a more alternative phenotype (e.g., significantly increased CD45-positive microglia, increased brain levels of interleukins 4 and 10, and reduced levels of CD68, F4/80, inducible nitric oxide synthase, and tumor necrosis factor). Our results suggest a beneficial role for complement C3 in plaque clearance and neuronal health as well as in modulation of the microglia phenotype.