Mice homozygous for a germline deletion of the interferon-γ gene (IFN-γ (−/−)) were infected with the LP-BM5 (BM5) retrovirus mixture to determine if the inability to produce IFN-γ reduces collateral CNS damage associated with chronic neuroinflammation. Virus burdens in spleens and brains of infected mice were comparable, but spatial memory deficits were manifested earlier and to a greater extent in BM5/IFN-γ (−/−) mice. The mice with spatial memory deficits showed considerable degradation of axons and microtubules, along with apoptosis of striatal neurons. These lesions were accompanied by extensive infiltration of perivascular spaces and ventricles by iNOS-positive leukocytes, and a 17-fold increase in CSF glutamate levels. Despite high levels of VCAM and ICAM expression on cerebral vasculature endothelia, the serum levels of soluble ICAM-1 were significantly decreased in BM5/IFN-γ (−/−) mice, which may contribute to the enhanced leukocyte infiltration and subsequent neuronal damage. These results suggest that the presence of IFN-γ is necessary at some points in the inflammatory process to protect against neurodegeneration.