Background Microglia, the major cell type that mediates active immune defence in the central nervous system (CNS), constantly survey the brain parenchyma through highly motile processes. Mounting evidence has implicated both beneficial and toxic roles of microglia when over-activated upon neuronal injury. Understanding the function of microglia in the brain may uncover the regulatory mechanisms for neuroinflammation and facilitate the development of a novel therapeutic strategy for Alzheimer's disease (AD). The ε4 allele of apolipoprotein E (APOE) is a major genetic risk factor for the late onset AD. ApoE, as the major cholesterol carrier in the brain, has been implicated in AD pathogenesis. However, how APOE and APOE isoforms directly regulate microglial functions remains largely unknown. Methods Using primary culture of microglia from Apoe knockout (KO) mice, APOE3 and APOE4 targeted replacement (TR) mouse, we investigated the characteristics of microglial secreted apoE particles and the biological effects of apoE isoforms on microglial inflammatory response, migratory ability, cell viability and proliferation. Meanwhile, microglia-neuron co-culture system was utilized to study the effects of apoE isoforms on neurite outgrowth.Results Herein, we found that microglia secret abundant lipidated apoE. Interestingly, apoE4 particles from primary microglia exhibited a higher lipidation status compared to apoE3 particles. Furthermore, apoE4 microglia exhibited a reduced migratory ability as well as enhanced inflammatory responses and neurotoxicity, indicating microglial apoE4 is involved in unfavourable functions. Conclusions Our findings revealed the critical roles for apoE and apoE isoforms in regulating microglial functions. Our results also indicate that targeting apoE-mediated microglial inflammatory responses may serve as a potential therapeutic strategy for AD.