Microglia, the resident immune cells of the central nervous system (CNS), play a crucial role in maintaining neural homeostasis but can also contribute to disease and injury when this state is disrupted or conversely play a pivotal role in neurorepair. One way that microglia exert their effects is through the secretion of small vesicles, microglia-derived exosomes (MGEVs). Exosomes facilitate intercellular communication through transported cargoes of proteins, lipids, RNA, and other bioactive molecules that can alter the behavior of the cells that internalize them. Under normal physiological conditions, MGEVs are essential to homeostasis, whereas the dysregulation of their production and/or alterations in their cargoes have been implicated in the pathogenesis of numerous neurodegenerative diseases, including Alzheimer's disease (AD), Parkinson's disease (PD), multiple sclerosis (MS), spinal cord injury (SCI), and traumatic brain injury (TBI). In contrast, MGEVs may also offer therapeutic potential by reversing inflammation or being amenable to engineering for the delivery of beneficial biologics or drugs. The effects of MGEVs are determined by the phenotypic state of the parent microglia. Exosomes from anti-inflammatory or pro-regenerative microglia support neurorepair and cell survival by delivering neurotrophic factors, anti-inflammatory mediators, and molecular chaperones. Further, MGEVs can also deliver components like mitochondrial DNA (mtDNA) and proteins to damaged neurons to enhance cellular metabolism and resilience. MGEVs derived from pro-inflammatory microglia can have detrimental effects on neural health. Their cargo often contains pro-inflammatory cytokines, molecules involved in oxidative stress, and neurotoxic proteins, which can exacerbate neuroinflammation, contribute to neuronal damage, and impair synaptic function, hindering neurorepair processes. The role of MGEVs in neurodegeneration and injury-whether beneficial or harmful-largely depends on how they modulate inflammation through the pro- and anti-inflammatory factors in their cargo, including cytokines and microRNAs. In addition, through the propagation of pathological proteins, such as amyloid-beta and alpha-synuclein, MGEVs can also contribute to disease progression in disorders such as AD and PD, or by the transfer of apoptotic or necrotic factors, they can induce neuron toxicity or trigger glial scarring during neurological injury. In this review, we have provided a comprehensive and up-to-date understanding of the molecular mechanisms underlying the multifaceted role of MGEVs in neurological injury and disease. In particular, the role that specific exosome cargoes play in various pathological conditions, either in disease progression or recovery, will be discussed. The therapeutic potential of MGEVs has been highlighted including potential engineering methodologies that have been employed to alter their cargoes or cell-selective targeting. Understanding the factors that influence the balance between beneficial and detrimental exosome signaling in the CNS is crucial for developing new therapeutic strategies for neurodegenerative diseases and neurotrauma.