Although considered an immunologically privileged site, the central nervous system (CNS) can display significant inflammatory responses, which may play a pathogenic role in a number of neurological diseases. Microglia appear to be particularly important for initiating and sustaining CNS inflammation. These cells exist in a quiescent form in the normal CNS, but acquire macrophage‐like properties (including active phagocytosis, upregulation of proteins necessary for antigen presentation, and production of proinflammatory cytokines) after stimulation with inflammatory substances such as lipopolysaccharide (LPS). Recent studies have focused on elucidating the role of neurons in the regulation of microglial inflammatory responses. In the present study, we demonstrate, using neuron‐microglial cocultures, that neurons are capable of inhibiting LPS‐induced tumor necrosis factor‐α (TNF‐α) production by microglia. This inhibition appears to be dependent on secretion of substances at axon terminals, as treatment with the presynaptic calcium channel blocker ω‐conotoxin abolishes this inhibitory effect. Moreover, we show that conditioned medium from neuronal cultures similarly inhibits microglial TNF‐α production, which provides additional evidence that neurons secrete inhibitory substances. We previously demonstrated that the transmembrane protein‐tyrosine phosphatase CD45 plays an important role in negatively regulating microglial activation. The recent characterization of CD22 as an endogenous ligand of this receptor led us to investigate whether neurons express this protein. Indeed, we were able to demonstrate CD22 mRNA and protein expression in cultured neurons and mouse brain, using reverse transcriptase‐polymerase chain reaction and antibody‐based techniques. Furthermore, we show that neurons secrete CD22, which functions as an inhibitor of microglial proinflammatory cytokine production. © 2004 Wiley‐Liss, Inc.