A growing list of Alzheimers disease (AD) genetic risk factors is being identified, but the contribution of these genetic mutations to disease remains largely unknown. Accumulating data support a role of lipid dysregulation and excessive ROS in the etiology of AD. Here, we identified cell-specific roles for eight AD risk-associated genes in ROS-induced glial lipid droplet (LD) formation. We demonstrate that ROS-induced glial LD formation requires two ABCA transporters (ABCA1 and ABCA7) in neurons, the APOE receptor (LRP1), endocytic genes (PICALM, CD2AP, and AP2A2) in glia, and retromer genes (VPS26 and VPS35) in both neurons and glia. Moreover, ROS strongly enhances Aβ42-toxicity in flies and Aβ42-plaque formation in mice. Finally, an ABCA1-activating peptide restores glial LD formation in the APOE4-associated loss of LD. This study places AD risk factors in a neuron-to-glia lipid transfer pathway with a critical role in protecting neurons from ROS-induced toxicity.