Borna disease virus 1 (BoDV‐1) is a neurotropic RNA virus that has been linked to fatal BoDV‐1 encephalitis (BVE) in humans. Ferroptosis represents a newly recognized kind of programmed cell death that marked by iron overload and lipid peroxidation. Various viral infections are closely related to ferroptosis. However, the link between BoDV‐1 infection and ferroptosis, as well as its role in BVE pathogenesis, remains inadequately understood. Herein, we used primary rat cortical neurons, human microglial HMC3 cells, and Sprague‒Dawley rats as models. BoDV‐1 infection induced ferroptosis, as ferroptosis characteristics were detected (iron overload, reactive oxygen species buildup, decreased antioxidant capacity, lipid peroxidation, and mitochondrial damage). Analysis via qRT‐PCR and Western blot demonstrated that BoDV‐1‐induced ferroptosis was mediated through Nrf2/HO‐1/SLC7a11/GPX4 antioxidant pathway suppression. Nrf2 downregulation was due to BoDV‐1 infection promoting Nrf2 ubiquitination and degradation. Following BoDV‐1‐induced ferroptosis, the PTGS2/PGE2 signaling pathway was activated, and various intracellular lipid peroxidation products and damage‐associated molecular patterns were released, contributing to BVE occurrence and progression. More importantly, inhibiting ferroptosis or the ubiquitin‒proteasome system effectively alleviated BVE. Collectively, these findings demonstrate the interaction between BoDV‐1 infection and ferroptosis and reveal BoDV‐1‐induced ferroptosis as an underlying pathogenic mechanism of BVE.