Microglia, the mononuclear phagocytes of the central nervous system (CNS), are important for the maintenance of CNS homeostasis, but also critically contribute to CNS pathology. Here we demonstrate that the nuclear factor kappa B (NF-κB) regulatory protein A20 is crucial in regulating microglia activation during CNS homeostasis and pathology. In mice, deletion of A20 in microglia increases microglial cell number and affects microglial regulation of neuronal synaptic function. Administration of a sublethal dose of lipopolysaccharide induces massive microglia activation, neuroinflammation, and lethality in mice with microglia-confined A20 deficiency. Microglia A20 deficiency also exacerbates multiple sclerosis (MS)-like disease, due to hyperactivation of the Nlrp3 inflammasome leading to enhanced interleukin-1β secretion and CNS inflammation. Finally, we confirm a Nlrp3 inflammasome signature and IL-1β expression in brain and cerebrospinal fluid from MS patients. Collectively, these data reveal a critical role for A20 in the control of microglia activation and neuroinflammation.