Synaptic loss is the cardinal feature linking neuropathology to cognitive decline in Alzheimer's disease (AD). However, the mechanism of synaptic damage remains incompletely understood. Here, using FRET-based glutamate sensor imaging, we show that amyloid-β peptide (Aβ) engages α7 nicotinic acetylcholine receptors to induce release of astrocytic glutamate, which in turn activates extrasynaptic NMDA receptors (eNMDARs) on neurons. In hippocampal autapses, this eNMDAR activity is followed by reduction in evoked and miniature excitatory postsynaptic currents (mEPSCs). Decreased mEPSC frequency may reflect early synaptic injury because of concurrent eNMDAR-mediated NO production, tau phosphorylation, and caspase-3 activation, each of which is implicated in spine loss. In hippocampal slices, oligomeric Aβ induces eNMDAR-mediated synaptic depression. In AD-transgenic mice compared with wild type, whole-cell recordings revealed excessive tonic eNMDAR activity accompanied by eNMDAR-sensitive loss of mEPSCs. Importantly, the improved NMDAR antagonist NitroMemantine, which selectively inhibits extrasynaptic over physiological synaptic NMDAR activity, protects synapses from Aβ-induced damage both in vitro and in vivo.