Laquinimod (LAQ) is a new oral immunomodulatory compound that reduces relapse rate, brain atrophy and disability progression in multiple sclerosis (MS). LAQ has well-documented effects on inflammation in the periphery, but little is known about its direct activity within the central nervous system (CNS). To elucidate the impact of LAQ on CNS-intrinsic inflammation, we investigated the effects of LAQ on cuprizone-induced demyelination in mice in vivo and on primary CNS cells in vitro. Demyelination, inflammation, axonal damage and glial pathology were evaluated in LAQ-treated wild type and Rag-1-deficient mice after cuprizone challenge. Using primary cells we tested for effects of LAQ on oligodendroglial survival as well as on cytokine secretion and NF-κB activation in astrocytes and microglia. LAQ prevented cuprizone-induced demyelination, microglial activation, axonal transections, reactive gliosis and oligodendroglial apoptoses in wild type and Rag-1-deficient mice. LAQ significantly decreased pro-inflammatory factors in stimulated astrocytes, but not in microglia. Oligodendroglial survival was not affected by LAQ in vitro. Astrocytic, but not microglial, NF-κB activation was markedly reduced by LAQ as evidenced by NF-κB reporter assay. LAQ also significantly decreased astrocytic NF-κB activation in cuprizone-treated mice. Our data indicate that LAQ prevents cuprizone-induced demyelination by attenuating astrocytic NF-κB activation. These effects are CNS-intrinsic and not mediated by peripheral immune cells. Therefore, LAQ downregulation of the astrocytic pro-inflammatory response may be an important mechanism underlying its protective effects on myelin, oligodendrocytes and axons. Modulation of astrocyte activation may be an attractive therapeutic target to prevent tissue damage in MS.