Retroviral envelopes are pathogenic glycoproteins which cause neuroinflammation, neurodegeneration, and endoplasmic reticulum stress responses. The human endogenous retrovirus (HERV-W) envelope protein, Syncytin-1, is highly expressed in CNS glia of individuals with multiple sclerosis (MS). In this study, we investigated the mechanisms by which Syncytin-1 mediated neuroimmune activation and oligodendrocytes damage. In brain tissue from individuals with MS, ASCT1, a receptor for Syncytin-1 and a neutral amino acid transporter, was selectively suppressed in astrocytes (p < 0.05). Syncytin-1 induced the expression of the endoplasmic reticulum stress sensor, old astrocyte specifically induced substance (OASIS), in cultured astrocytes, similar to findings in MS brains. Overexpression of OASIS in astrocytes increased inducible NO synthase expression but concurrently down-regulated ASCT1 (p < 0.01). Treatment of astrocytes with a NO donor enhanced expression of early growth response 1, with an ensuing reduction in ASCT1 expression (p < 0.05). Small-interfering RNA molecules targeting Syncytin-1 selectively down-regulated its expression, preventing the suppression of ASCT1 and the release of oligodendrocyte cytotoxins by astrocytes. A Syncytin-1-transgenic mouse expressing Syncytin-1 under the glial fibrillary acidic protein promoter demonstrated neuroinflammation, ASCT1 suppression, and diminished levels of myelin proteins in the corpus callosum, consistent with observations in CNS tissues from MS patients together with neurobehavioral abnormalities compared with wild-type littermates (p < 0.05). Thus, Syncytin-1 initiated an OASIS-mediated suppression of ASCT1 in astrocytes through the induction of inducible NO synthase with ensuing oligodendrocyte injury. These studies provide new insights into the role of HERV-mediated neuroinflammation and its contribution to an autoimmune disease.