The human apolipoprotein (apo) E4 isoform is associated with an increased risk for Alzheimer's disease (AD) and poor prognosis after acute CNS injury. Addition of human apoE inhibits murine microglial activation in culture, suggesting that microglia might be an important physiological target of apoE. In the present study, we examined the role of endogenous murine apoE in modulating microglial nitric oxide (NO) production following lipopolysaccharide (LPS) stimulation. Brain cultures from apoE-deficient mouse pups showed enhanced NO production relative to cultures from wild-type mice and from transgenic mice expressing the human apoE3 isoform, demonstrating that endogenous apoE produced by glial cultures is capable of inhibiting microglial function. ApoE produced within the brain may suppress microglial reactivity and thus alter the CNS response to acute and chronic injury.