Despite the fact that harboring the apolipoprotein E4 (APOE4) allele represents the single greatest risk factor for late-onset Alzheimer's disease (AD), the exact mechanism by which apoE4 contributes to disease progression remains unknown. Recently, we demonstrated that a 151 amino-terminal fragment of apoE4 (nApoE41-151) localizes within the nucleus of microglia in the human AD brain, suggesting a potential role in gene expression. In the present study, we investigated this possibility utilizing BV2 microglia cells treated exogenously with nApoE41-151. The results indicated that nApoE41-151 leads to morphological activation of microglia cells through, at least in part, the downregulation of a novel ER-associated protein, CXorf56. Moreover, treatment of BV2 cells with nApoE41-151 resulted in a 68-fold increase in the expression of the inflammatory cytokine, TNFα, a key trigger of microglia activation. In this regard, we also observed a specific binding interaction of nApoE41-151 with the TNFα promoter region. Collectively, these data identify a novel gene-regulatory pathway involving CXorf56 that may link apoE4 to microglia activation and inflammation associated with AD.