Alzheimer’s disease (AD), the most common cause of dementia in the elderly, is characterized by the accumulation of intracellular neurofibrillary tangles, extracellular amyloid plaques, and neuroinflammation. In partnership with microglial cells, astrocytes are key players in the regulation of neuroinflammation. Fatty acid binding protein 7 (FABP7) belongs to a family of conserved proteins that regulate lipid metabolism, energy homeostasis, and inflammation. FABP7 expression is largely restricted to astrocytes and radial glia-like cells in the adult central nervous system. We observed that treatment of primary hippocampal astrocyte cultures with amyloid β fragment 25–35 (Aβ25–35) induces FABP7 upregulation. In addition, FABP7 expression is upregulated in the brain of APP/PS1 mice, a widely used AD mouse model. Co-immunostaining with specific astrocyte markers revealed increased FABP7 expression in astrocytes. Moreover, astrocytes surrounding amyloid plaques displayed increased FABP7 staining when compared to non-plaque-associated astrocytes. A similar result was obtained in the brain of AD patients. Whole transcriptome RNA sequencing analysis of human astrocytes differentiated from induced pluripotent stem cells (i-astrocytes) overexpressing FABP7 identified 500 transcripts with at least a 2-fold change in expression. Gene Ontology enrichment analysis identified (i) positive regulation of cytokine production and (ii) inflammatory response as the top two statistically significant overrepresented biological processes. We confirmed that wild-type FABP7 overexpression induces an NF-κB-driven inflammatory response in human i-astrocytes. On the other hand, the expression of a ligand-binding impaired mutant FABP7 did not induce NF-κB activation. Together, our results suggest that the upregulation of FABP7 in astrocytes could contribute to the neuroinflammation observed in AD.