Cellular models of induced pluripotent stem cell (iPSC)-derived microglia and macrophages are an emerging toolbox to investigate neuroinflammation in vitro. We previously demonstrated that murine iPSC-microglia and iPSC-macrophages display phenotypical activation properties highly comparable to microglia and macrophages in vivo. Here we extended the characterization of iPSC-microglia and iPSC-macrophages with the analysis of their transcriptome profile. Next, these cellular models were employed to evaluate neuroimmune toxicity in vitro and to investigate the immune-modulatory properties of interleukin 13 (IL13), a cytokine known for its ability to protect against neuroinflammation-induced pathology by modulating microglia and macrophage activation. iPSC-microglia and iPSC-macrophages, in co-culture with astrocyte-committed neural stem cells (NSC), were (pre)treated with IL13 and stimulated with lipopolysaccharide (LPS) and interferon γ (IFNγ), to assess how IL13 modulates their inflammatory response. Additionally, the use of luciferase-expressing NSC (Luc-NSC) allowed real-time monitoring of immune-mediated neurotoxicity. Despite the known anti-inflammatory properties of IL13, iPSC-microglia primed with IL13 before LPS + IFNγ stimulation significantly increased NO secretion. This was associated with a marked reduction of the luminescence signal produced by Luc-NSC. Interestingly, we observed that IL13 signaling has a divergent functional outcome in microglia as compared to macrophages, as for the latter no major alterations in NO release and Luc-NSC viability were observed upon IL13 (pre)treatment. Finally, the striking IL13-induced upregulation of NO secretion by microglia under pro-inflammatory conditions was confirmed in vivo, where intracerebral delivery of IL13 increased inducible nitric oxide synthase mRNA expression. Concluding, we applied iPSC-derived neuroimmune cell culture models to identify distinct neuroimmune (toxicity) responses of microglia and macrophages to IL13-based immune modulation.