Chitinase-3-like protein 1 (CHI3L1) is primarily secreted by activated astrocytes in the brain and is known as a reliable biomarker for inflammatory central nervous system (CNS) conditions such as neurodegeneration and autoimmune disorders like neuromyelitis optica (NMO). NMO is an astrocyte disease caused by autoantibodies targeting the astroglial protein aquaporin 4 (AQP4) and leads to vision loss, motor deficits, and cognitive decline. In this study examining CHI3L1's biological function in neuroinflammation, we found that CHI3L1 expression correlates with cognitive impairment in our NMO patient cohort. Activated astrocytes secrete CHI3L1 in response to AQP4 autoantibodies, and this inhibits the proliferation and neuronal differentiation of neural stem cells. Mouse models showed decreased hippocampal neurogenesis and impaired learning behaviors, which could be rescued by depleting CHI3L1 in astrocytes. The molecular mechanism involves CHI3L1 engaging the CRTH2 receptor and dampening β-catenin signaling for neurogenesis. Blocking this CHI3L1/CRTH2/β-catenin cascade restores neurogenesis and improves cognitive deficits, suggesting the potential for therapeutic development in neuroinflammatory disorders.