PVC-211 murine leukemia virus (MuLV) is a neuropathogenic retrovirus that has undergone genetic changes from its nonneuropathogenic parent, Friend MuLV, that allow it to efficiently infect rat brain capillary endothelial cells (BCEC). To clarify the mechanism by which PVC-211 MuLV expression in BCEC induces neurological disease, we examined virus-infected rats at various times during neurological disease progression for vascular and inflammatory changes. As early as 2 weeks after virus infection and before any marked appearance of spongiform neurodegeneration, we detected vessel leakage and an increase in size and number of vessels in the areas of the brain that eventually become diseased. Consistent with these findings, the amount of vascular endothelial growth factor (VEGF) increased in the brain as early as 1 to 2 weeks postinfection. Also detected at this early disease stage was an increased level of macrophage inflammatory protein 1␣ (MIP-1␣), a cytokine involved in recruitment of microglia to the brain. This was followed at 3 weeks postinfection by a marked accumulation of activated microglia in the spongiform areas of the brain accompanied by an increase in tissue plasminogen activator, a product of microglia implicated in neurodegeneration. Pathological observations at the end stage of the disease included loss of neurons, decreased myelination, and mild muscle atrophy. Treatment of PVC-211 MuLV-infected rats with clodronate-containing liposomes, which specifically kill microglia, significantly blocked neurodegeneration. Together, these results suggest that PVC-211 MuLV infection of BCEC results in the production of VEGF and MIP-1␣, leading to the vascular changes and microglial activation necessary to cause neurodegeneration.