The maintenance of a benign chronic Toxoplasma gondii infection is mainly dependent on the persistent presence of gamma interferon (IFN-gamma) in the central nervous system (CNS). However, IFN-gamma-activated microglia are paradoxically involved in parasitism control and in tissue damage during a broad range of CNS pathologies. In this way, nitric oxide (NO), the main toxic metabolite produced by IFN-gamma-activated microglia, may cause neuronal injury during T. gondii infection. Despite the potential NO toxicity, neurodegeneration is not a common finding during chronic T. gondii infection. In this work, we describe a significant down-modulation of NO production by IFN-gamma-activated microglia in the presence of conditioned medium of T. gondii-infected astrocytes (CMi). The inhibition of NO production was paralleled with recovery of neurite outgrowth when neurons were cocultured with IFN-gamma-activated microglia in the presence of CMi. Moreover, the modulation of NO secretion and the neuroprotective effect were shown to be dependent on prostaglandin E(2) (PGE(2)) production by T. gondii-infected astrocytes and autocrine secretion of interleukin-10 (IL-10) by microglia. These events were partially eliminated when infected astrocytes were treated with aspirin and cocultures were treated with anti-IL-10 neutralizing antibodies and RP-8-Br cyclic AMP (cAMP), a protein kinase A inhibitor. Further, the modulatory effects of CMi were mimicked by the presence of exogenous PGE(2) and by forskolin, an adenylate cyclase activator. Altogether, these data point to a T. gondii-triggered regulatory mechanism involving PGE(2) secretion by astrocytes and cAMP-dependent IL-10 secretion by microglia. This may reduce host tissue inflammation, thus avoiding neuron damage during an established Th1 protective immune response.