The aryl hydrocarbon receptor (AhR) regulates peripheral immunity; but its role in microglia-mediated neuroinflammation in the brain remains unknown. Here, we demonstrate that AhR mediates both anti-inflammatory and proinflammatory effects in lipopolysaccharide (LPS)-activated microglia. Activation of AhR by its ligands, formylindolo[3,2-b]carbazole (FICZ) or 3-methylcholanthrene (3MC), attenuated LPS-induced microglial immune responses. AhR also showed proinflammatory effects, as evidenced by the findings that genetic silence of AhR ameliorated the LPS-induced microglial immune responses and LPS-activated microglia-mediated neurotoxicity. Similarly, LPS-induced expressions of tumor necrosis factor α (TNFα) and inducible nitric oxide synthase (iNOS) were reduced in the cerebral cortex of AhR-deficient mice. Intriguingly, LPS upregulated and activated AhR in the absence of AhR ligands via the MEK1/2 signaling pathway, which effects were associated with a transient inhibition of cytochrome P450 1A1 (CYP1A1). Although AhR ligands synergistically enhance LPS-induced AhR activation, leading to suppression of LPS-induced microglial immune responses, they cannot do so on their own in microglia. Chromatin immunoprecipitation results further revealed that LPS-FICZ co-treatment, but not LPS alone, not only resulted in co-recruitment of both AhR and NFκB onto the κB site of TNFα gene promoter but also reduced LPS-induced AhR binding to the DRE site of iNOS gene promoter. Together, we provide evidence showing that microglial AhR, which can be activated by LPS, exerts bi-directional effects on the regulation of LPS-induced neuroinflammation, depending on the availability of external AhR ligands. These findings confer further insights into the potential link between environmental factors and the inflammatory brain disorders. GLIA 2015;63:1138-1154 Main Points: LPS upregulates and activates AhR in microglia. AhR mediates the LPS-induced pro-inflammatory responses in microglia and mouse brain. AhR ligand application shunts LPS-activated AhR to the anti-inflammatory mode involving AhR-NFκB crosstalk.