Following injury to the peripheral nervous system (PNS), microglia in the spinal dorsal horn (SDH) become activated and contribute to the development of local neuro-inflammation, which may regulate neuropathic pain processing. The molecular mechanisms that control microglial activation and its effects on neuropathic pain remain incompletely understood. We deleted the gene encoding the plasma membrane receptor, LDL Receptor-related Protein-1 (LRP1), conditionally in microglia using two distinct promoter-Cre recombinase systems in mice. LRP1 deletion in microglia blocked development of tactile allodynia, a neuropathic pain-related behavior, after partial sciatic nerve ligation (PNL). LRP1 deletion also substantially attenuated microglial activation and pro-inflammatory cytokine expression in the SDH following PNL. Because LRP1 shedding from microglial plasma membranes generates a highly pro-inflammatory soluble product, we demonstrated that factors which activate spinal cord microglia, including lipopolysaccharide (LPS) and colony-stimulating factor-1, promote LRP1 shedding. Proteinases known to mediate LRP1 shedding, including ADAM10 and ADAM17, were expressed at increased levels in the SDH after PNL. Furthermore, LRP1-deficient microglia in cell culture expressed significantly decreased levels of interleukin-1β and interleukin-6 when treated with LPS. We conclude that in the SDH, microglial LRP1 plays an important role in establishing and/or amplifying local neuro-inflammation and neuropathic pain following PNS injury. The responsible mechanism most likely involves proteolytic release of LRP1 from the plasma membrane to generate a soluble product that functions similarly to pro-inflammatory cytokines in mediating crosstalk between cells in the SDH and in regulating neuropathic pain.