Neuroinflammation is associated with synapse dysfunction and cognitive decline in patients and animal models. One candidate for translating the inflammatory stress into structural and functional changes in neural networks is the transcriptional repressor RE1-silencing transcription factor (REST) that regulates the expression of a wide cluster of neuron-specific genes during neurogenesis and in mature neurons. To study the cellular and molecular pathways activated under inflammatory conditions mimicking the experimental autoimmune encephalomyelitis (EAE) environment, we analyzed REST activity in neuroblastoma cells and mouse cortical neurons treated with activated T cell or microglia supernatant and distinct pro-inflammatory cytokines. We found that REST is activated by a variety of neuroinflammatory stimuli in both neuroblastoma cells and primary neurons, indicating that a vast transcriptional change is triggered during neuroinflammation. While a dual activation of REST and its dominant-negative splicing isoform REST4 was observed in N2a neuroblastoma cells, primary neurons responded with a pure full-length REST upregulation in the absence of changes in REST4 expression. In both cases, REST upregulation was associated with activation of Wnt signaling and increased nuclear translocation of β-catenin, a well-known intracellular transduction pathway in neuroinflammation. Among single cytokines, IL-1β caused a potent and prompt increase in REST transcription and translation in neurons, which promoted a delayed and strong synaptic downscaling specific for excitatory synapses, with decreased frequency and amplitude of spontaneous synaptic currents, decreased density of excitatory synaptic connections, and decreased frequency of action potential-evoked Ca2+ transients. Most important, the IL-1β effects on excitatory transmission were strictly REST dependent, as conditional deletion of REST completely occluded the effects of IL-1β activation on synaptic transmission and network excitability. Our results demonstrate that REST upregulation represents a new pathogenic mechanism for the synaptic dysfunctions observed under neuroinflammatory conditions and identify the REST pathway as therapeutic target for EAE and, potentially, for multiple sclerosis.