Over the past two decades it became evident that the immune system plays a central role in modulating learning, memory and neural plasticity. Under normal quiescent conditions, immune mechanisms are activated by environmental/psychological stimuli and positively regulate the remodeling of neural circuits, promoting memory consolidation, hippocampal long-term potentiation (LTP) and neurogenesis. These beneficial effects of the immune system are mediated by complex interactions among brain cells with immune functions (particularly microglia and astrocytes), peripheral immune cells (particularly T cells and macrophages), neurons, and neural precursor cells. These interactions involve the responsiveness of non-neuronal cells to classical neurotransmitters (e.g., glutamate and monoamines) and hormones (e.g., glucocorticoids), as well as the secretion and responsiveness of neurons and glia to low levels of inflammatory cytokines, such as interleukin (IL)-1, IL-6, and TNFα, as well as other mediators, such as prostaglandins and neurotrophins. In conditions under which the immune system is strongly activated by infection or injury, as well as by severe or chronic stressful conditions, glia and other brain immune cells change their morphology and functioning and secrete high levels of pro-inflammatory cytokines and prostaglandins. The production of these inflammatory mediators disrupts the delicate balance needed for the neurophysiological actions of immune processes and produces direct detrimental effects on memory, neural plasticity and neurogenesis. These effects are mediated by inflammation-induced neuronal hyper-excitability and adrenocortical stimulation, followed by reduced production of neurotrophins and other plasticity-related molecules, facilitating many forms of neuropathology associated with normal aging as well as neurodegenerative and neuropsychiatric diseases.