Cognitive impairment is a common feature in neurodegenerative diseases such as multiple sclerosis (MS). This study aims to explore the potential of enhancing the beneficial effects of fluoxetine (FLX), a neuroprotective agent known for its ability to increase neural plasticity by utilizing nanoparticles. The study specifically focuses on the synthesis and evaluation of PEGylated chitosan nanoparticles of FLX and its effect on demyelination and the subsequent cognitive impairment (CI) in the hippocampus of rats induced by local injection of lysophosphatidylcholine (LPC). Chitosan/polyethylene glycol nanoparticles were synthesized, and their properties were analyzed. Demyelination was induced in rats via hippocampal injections of lysolecithin. Behavioral assessments included open field maze, elevated plus maze, and novel object recognition memory (NORM) tests. Hippocampal levels of insulin-like growth factor (IGF-1) and brain-derived neurotrophic factor (BDNF) were measured using enzyme-linked immunoassay (ELISA). The extent of remyelination was quantified using Luxol fast blue staining. Nanoparticle size measured 240.2 nm with 53 % encapsulation efficacy. Drug release exhibited a slow pattern, with 76 % released within 4 h. Nanoparticle-treated rats displayed reduced anxiety-like behavior, improved memory, increased BDNF levels, and a reduced extent of demyelination, with no change in IGF- levels. In addition, FLX -loaded chitosan nanoparticles had better effect on cognitive improvement, BDNF levels in the hippocampus that FLX. Altering pharmacokinetics and possibly pharmacodynamics. These findings highlight the potential of innovative drug delivery systems, encouraging further research in this direction.