The Klotho gene encodes a single-pass transmembrane protein that is expressed in the brain, which has been known to have anti-aging and cognition enhancing properties. Overexpression of klotho in mice extends lifespan and improves memory and learning. As aging is the main risk factor for Alzheimer's disease (AD) and cognitive impairment a major characteristic of this disease, could klotho be a new avenue to explore as a potential therapeutic strategy for AD? Klotho's exact mechanisms of action have yet to be fully elucidated, and hence the aim of this study was to identify the signalling pathways involved in klotho's neuroprotective properties. Human brain tissue (acquired from the Manchester Brain Bank), 90 day old cortical neurons derived from human induced pluripotent stem cells (iPSCs) and SH-SY5Y neuroblastoma cell line were used for this study. To study the location and shedding of klotho, brain homogenates were prepared, lipid rafts isolated, and immunoblotting performed. Recombinant klotho was administered to the neurons and SH-SY5Y cells for 4 hours prior to immunohistochemistry, immunoblotting and membrane potential assays to study the pathway and downstream effects of klotho. Endogenous klotho was enriched within lipid rafts in human brain tissue, and was at a reduced level in brains from AD patients compared with age-matched controls. The proteolytic cleavage of klotho was mediated by ADAM10 and was enhanced, or inhibited, by the administration of the muscarinic agonist, carbachol, and the ADAM10 inhibitor, GI 254023X, respectively. Recombinant, soluble klotho bound to the cell surface by 10 minutes through interaction with a trypsin insensitive receptor and was then internalized within 30 minutes via dynamin-dependent endocytosis similar to other ligand-receptor interactions. The administration of soluble klotho led to an increase in the expression of the NMDA receptor subunit, GluN2B and enhanced membrane depolarisation, as well as protection against oxidative damage. These results indicate that transmembrane klotho is present in lipid rafts and is cleaved by ADAM10. The soluble form of klotho is internalised leading to enhanced neuronal activity and neuroprotection via NMDAR-dependent mechanisms. This highlights klotho's mechanisms of action as a new potential therapeutic strategy for AD.