The proinflammatory cytokine interleukin-1 (IL-1) within the brain is critically involved in mediating the memory impairment induced by acute inflammatory challenges and psychological stress. However, the role of IL-1 in memory impairment and suppressed neurogenesis induced by chronic stress exposure has not been investigated before now. We report here that mice that were isolated for 4 weeks displayed a significant elevation in hippocampal IL-1beta levels concomitantly with body weight loss, specific impairment in hippocampal-dependent memory, and decreased hippocampal neurogenesis. To examine the causal role of IL-1 in these effects, we developed a novel approach for long-term delivery of IL-1 receptor antagonist (IL-1ra) into the brain, using transplantation of neural precursor cells (NPCs), obtained from neonatal mice with transgenic overexpression of IL-1ra (IL-1raTG) under the glial fibrillary acidic protein promoter. Four weeks following intrahippocampal transplantation of IL-1raTG NPCs labeled with PKH-26, the transplanted cells were incorporated within the dentate gyrus and expressed mainly astrocytic markers. IL-1ra levels were markedly elevated in the hippocampus, but not in other brain regions, by 10 days and for at least 4 weeks post-transplantation. Transplantation of IL-1raTG NPCs completely rescued the chronic isolation-induced body weight loss, memory impairment, and suppressed hippocampal neurogenesis, compared with isolated mice transplanted with WT cells or sham operated. The transplantation had no effect in group-housed mice. These findings elucidate the role of IL-1 in the pathophysiology of chronic isolation and suggest that transplantation of IL-1raTG NPCs may provide a useful therapeutic procedure for IL-1-mediated memory disturbances in chronic inflammatory and neurological conditions.