Although deposition of amyloid beta-peptide (Abeta) as Abeta plaques involves activation of microglia-mediated inflammatory responses, activated microglia ultimately fail to clear Abeta plaques in the brains of either Alzheimer's disease (AD) patients or AD mouse models. Mounting evidence suggests that chronic microglia-mediated immune response during Abeta deposition etiologically contributes to AD pathogenesis by promoting Abeta plaque formation. However, the mechanisms that govern microglia response in the context of cerebral Abeta/beta-amyloid pathology are not well understood. We show that ligation of CD40 by CD40L modulates Abeta-induced innate immune responses in microglia, including decreased microglia phagocytosis of exogenous Abeta(1-42) and increased production of pro-inflammatory cytokines. CD40 ligation in the presence of Abeta(1-42) leads to adaptive activation of microglia, as evidenced by increased co-localization of MHC class II with Abeta. To assess their antigen-presenting cell (APC) function, cultured microglia were pulsed with Abeta(1-42) in the presence of CD40L and co-cultured with CD4(+) T cells. Under these conditions, microglia stimulate T cell-derived IFN-gamma and IL-2 production, suggesting that CD40 signaling promotes the APC phenotype. These data provide a mechanistic explanation for our previous work showing decreased microgliosis associated with diminished cerebral Abeta/beta-amyloid pathology when blocking CD40 signaling in transgenic Alzheimer's mice.