Elevated levels of extracellular glutamate cause excitotoxic oligodendrocyte cell death and contribute to progressive oligodendrocyte loss and demyelination in white matter disorders such as multiple sclerosis and periventricular leukomalacia. However, the mechanism by which glutamate homeostasis is altered in such conditions remains elusive. We show here that microglial cells, in their activated state, compromise glutamate homeostasis in cultured oligodendrocytes. Both activated and resting microglial cells release glutamate by the cystine-glutamate antiporter system x c−. In addition, activated microglial cells act to block glutamate transporters in oligodendrocytes, leading to a net increase in extracellular glutamate and subsequent oligodendrocyte death. The blocking of α-amino-3-hydroxy-5-methyl-4-isoxazolepropionic acid (AMPA)/kainate receptors or the system x c− antiporter prevented the oligodendrocyte injury produced by exposure to LPS-activated microglial cells in mixed glial cultures. In a whole-mount rat optic nerve, LPS exposure produced wide-spread oligodendrocyte injury that was prevented by AMPA/kainate receptor block and greatly reduced by a system x c− antiporter block. The cell death was typified by swelling and disruption of mitochondria, a feature that was not found in closely associated axonal mitochondria. Our results reveal a novel mechanism by which reactive microglia can contribute to altering glutamate homeostasis and to the pathogenesis of white matter disorders.