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Central nervous system (CNS) inflammation in multiple sclerosis (MS) drives neuro-axonal loss resulting in irreversible disability. While transcripts of mitochondrial genes are strongly suppressed in neurons during CNS inflammation, it is unknown whether this results in mitochondrial dysfunction and whether interventions that increase mitochondrial function can rescue neurodegeneration. Here we show that suppression of mitochondrial gene transcripts in inflamed neurons was predominantly affecting genes of the electron transport chain resulting in impaired mitochondrial complex IV activity. This was associated with posttranslational inactivation of the transcriptional co-regulator peroxisome proliferator-activated receptor gamma co-activator 1-α (PGC-1α). Neuronal overexpression ofPgc-1αled to increased numbers of mitochondria, complex IV activity and elevated maximum respiratory capacity. Moreover,Pgc-1α-overexpressing neurons showed a higher mitochondrial membrane potential that related to an improved calcium buffering capacity. Accordingly, neuronal deletion ofPgc-1αaggravated neurodegeneration during experimental autoimmune encephalomyelitis (EAE), while neuronal overexpression ofPgc-1αameliorated EAE disease course and preserved neurons. Our study provides systemic insights into mitochondrial dysfunction in neurons during inflammation and commends elevation of mitochondrial activity as a promising neuroprotective strategy.