Emotional and cognitive deficits and associated hippocampal damage observed in multiple sclerosis (MS) are now recognized as primary disease manifestations. However, the pathological substrate of these dysfunctions is unclear. In the experimental autoimmune encephalomyelitis (EAE) MS model, impaired hippocampal-dependent functions are concomitant with severe microglial reactivity and neurodegeneration, but reports vary with respect to evidence of lymphocytic infiltration, raising questions as to the nature of the underlying neurodegenerative mechanisms. Our investigations of EAE-induced inflammation across the hippocampal formation showed CD3 infiltration only in regions adjacent to inflamed meningeal membranes interposed between the ventral aspect of the hippocampus and the dorsal aspect of the mid-brain, but widespread microglial reactivity across the structure. Regions that contact the lateral ventricles do not show inflammation, but CD3 cells are observed in the adjacent ventricular space and choroid plexus, suggesting that microglial reactivity in these regions results from exposure to proinflammatory mediators released into the ventricles. These data indicate that multiple pathophysiological mechanisms underlie hippocampal damage during EAE. Treatment with the immunomodulator FTY720 eliminates microglial reactivity across the whole structure, suggesting potential benefit for neuropsychological symptoms in MS.