West Nile virus (WNV) infection causes neurological disease at all levels of the neural axis, accompanied by neuroinflammation and neuronal loss, although the underlying mechanisms remain uncertain. Given the substantial activation of neuroinflammatory pathways observed in WNV infection, we hypothesized that WNV-mediated neuroinflammation and cell death occurred through WNV infection of both glia and neurons, which was driven in part by WNV capsid protein expression. Analysis of autopsied neural tissues from humans with WNV encephalomyelitis (WNVE) revealed WNV infection of both neurons and glia. Upregulation of proinflammatory genes, CXCL10, interleukin-1beta, and indolamine-2',3'-deoxygenase with concurrent suppression of the protective astrocyte-specific endoplasmic reticulum stress sensor gene, OASIS (for old astrocyte specifically induced substance), was evident in WNVE patients compared to non-WNVE controls. These findings were supported by increased ex vivo expression of these proinflammatory genes in glia infected by WNV-NY99. WNV infection caused endoplasmic reticulum stress gene induction and apoptosis in neurons but did not affect glial viability. WNV-infected astrocytic cells secreted cytotoxic factors, which caused neuronal apoptosis. The expression of the WNV-NY99 capsid protein in neurons and glia by a Sindbis virus-derived vector (SINrep5-WNVc) caused neuronal death and the release of neurotoxic factors by infected astrocytes, coupled with proinflammatory gene induction and suppression of OASIS. Striatal implantation of SINrep5-WNV(C) induced neuroinflammation in rats, together with the induction of CXCL10 and diminished OASIS expression, compared to controls. Moreover, magnetic resonance neuroimaging showed edema and tissue injury in the vicinity of the SINrep5-WNVc implantation site compared to controls, which was complemented by neurobehavioral abnormalities in the SINrep5-WNVc-implanted animals. These studies underscore the important interactions between the WNV capsid protein and neuroinflammation in the pathogenesis of WNV-induced neurological disorders.