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Aberrant handling of Amyloid Precursor Protein (APP) and β-amyloid (Aβ), glial activation and inflammation are key events in Alzheimer’s disease. We set out to determine the role of inflammation on microglial reactivity against APP. We studied microglia-mediated neurotoxicity, uptake and degradation of a biotinylated APP construct (biotin-APP-C-244). APP, in contrast to Aβ, only induced mild activation of glial cells. However, under pro-inflammatory conditions, APP induced microglial-mediated cytotoxicity. Biotin-APP-C-244 or lipopolysaccharide and interferon-gamma (LPS+IFNγ), administered separately, did not change reduction metabolism of microglia. However, biotin-APP-C-244+(LPS+IFNγ) increased microglial reactivity and decreased reduction metabolism by 75% (P<0.001). Biotin-APP-C-244 was readily taken up by microglial cells; 80% was phagocytosed at 2 h. In the presence of LPS+IFNγ, phagocytosis of biotin-APP-C-244 was reduced at 2 h; and cell damage was evident after 4 h. Our results support our hypothesis that, in neuroinflammation, microglial scavenger function is impaired and reactivity against APP enhanced as an initial step for neurodegeneration.