Recent studies suggest that excitotoxicity may contribute to neuronal damage in neurodegenerative diseases including Alzheimer disease, Parkinson disease, amyotrophic lateral sclerosis, and multiple sclerosis. Activated microglia have been observed around degenerative neurons in these diseases, and they are thought to act as effector cells in the degeneration of neural cells in the central nervous system. Neuritic beading, focal bead-like swellings in the dendrites and axons, is a neuropathological sign in epilepsy, trauma, ischemia, aging, and neurodegenerative diseases. Previous reports showed that neuritic beading is induced by various stimuli including glutamate or nitric oxide and is a neuronal response to harmful stimuli. However, the precise physiologic significance of neuritic beading is unclear. We provide evidence that neuritic beading induced by activated microglia is a feature of neuronal cell dysfunction toward neuronal death, and the neurotoxicity of activated microglia is mediated through N-methyl-d-aspartate (NMDA) receptor signaling. Neuritic beading occurred concordant with a rapid drop in intracellular ATP levels and preceded neuronal death. The actual neurite beads consisted of collapsed cytoskeletal proteins and motor proteins arising from impaired neuronal transport secondary to cellular energy loss. The drop in intracellular ATP levels was because of the inhibition of mitochondrial respiratory chain complex IV activity downstream of NMDA receptor signaling. Blockage of NMDA receptors nearly completely abrogated mitochondrial dysfunction and neurotoxicity. Thus, neuritic beading induced by activated microglia occurs through NMDA receptor signaling and represents neuronal cell dysfunction preceding neuronal death. Blockage of NMDA receptors may be an effective therapeutic approach for neurodegenerative diseases.