In the CNS, microglia are activated in response to injury or infection and in neurodegenerative diseases. The endocytic and cell signaling receptor, LDL receptor-related protein-1 (LRP1), is reported to suppress innate immunity in macrophages and oppose microglial activation. The goal of this study was to identify novel mechanisms by which LRP1 may regulate microglial activation. Using primary cultures of microglia isolated from mouse brains, we demonstrated that LRP1 gene silencing increases expression of proinflammatory mediators; however, the observed response was modest. By contrast, the LRP1 ligand, receptor-associated protein (RAP), robustly activated microglia, and its activity was attenuated in LRP1-deficient cells. An important element of the mechanism by which RAP activated microglia was its ability to cause LRP1 shedding from the plasma membrane. This process eliminated cellular LRP1, which is anti-inflammatory, and generated a soluble product, shed LRP1 (sLRP1), which is potently proinflammatory. Purified sLRP1 induced expression of multiple proinflammatory cytokines and the mRNA encoding inducible nitric-oxide synthase in both LRP1-expressing and -deficient microglia. LPS also stimulated LRP1 shedding, as did the heat-shock protein and LRP1 ligand, calreticulin. Other LRP1 ligands, including α2-macroglobulin and tissue-type plasminogen activator, failed to cause LRP1 shedding. Treatment of microglia with a metalloproteinase inhibitor inhibited LRP1 shedding and significantly attenuated RAP-induced cytokine expression. RAP and sLRP1 both caused neuroinflammation in vivo when administered by stereotaxic injection into mouse spinal cords. Collectively, these results suggest that LRP1 shedding from microglia may amplify and sustain neuroinflammation in response to proinflammatory stimuli.