Alzheimer’s disease (AD) is the most common neurodegenerative disease worldwide. Pharmacological treatments presently available can slow down the progression of symptoms but can not cure the disease. Currently there is widening recognition that AD is closely associated with impaired insulin signaling and glucose metabolism in brain, suggesting it to be a brain-specific form of diabetes and so also termed as “type 3 diabetes”. Hence investigating the role of pharmacological agents that could ameliorate neuronal insulin resistance merit attention in AD therapeutics, however the therapeutics for pathophysiological condition like neuronal insulin resistance itself is largely unknown. In the present study we have determined the effect of metformin on neuronal insulin resistance and AD-associated characteristics in an in vitro model of “type 3 diabetes” by differentiating neuronal cell line Neuro-2a under prolonged presence of insulin. We observed that prolonged hyperinsulinemic conditions in addition to generating insulin resistance also led to development of hallmark AD-associated neuropathological changes. Treatment with metformin sensitized the impaired insulin actions and also prevented appearance of molecular and pathological characteristics observed in AD. The results thus demonstrate possible therapeutic efficacy of peripheral insulin-sensitizer drug metformin in AD by its ability to sensitize neuronal insulin resistance. These findings also provide direct evidences linking hyperinsulinemia and AD and suggest a unique opportunity for prevention and treatment of “type 3 diabetes”.