Multiple Sclerosis (MS) is a chronic degenerative disease of the central nervous system (CNS) characterized by inflammation, demyelination, and progressive neurodegeneration. These processes, combined with the failure of reparative remyelination initiated by oligodendrocyte precursor cells (OPCs), lead to irreversible neurological impairment. The cytokine tumor necrosis factor (TNF) has been implicated in CNS repair via activation of its cognate receptor TNFR2 in glia. Here, we demonstrate the important role of TNFR2 in regulating OPC function in vivo during demyelinating disease, and that TNFR2 expressed in OPCs modulates OPC-microglia interactions. In PdgfrαCreERT:Tnfrsf1bfl/fl:Eyfp mice with selective TNFR2 ablation in OPCs, we observed an earlier onset and disease peak in experimental autoimmune encephalomyelitis (EAE). This was associated with accelerated immune cell infiltration and increased microglia activation in the spinal cord. Similarly, PdgfrαCreERT:Tnfrsf1bfl/fl:Eyfp mice showed rapid and increased microglia reactivity compared to control mice in the corpus callosum after cuprizone-induced demyelination, followed by chronic reduction in the number of mature myelinating oligodendrocytes (OLs). With EAE and cuprizone models combined, we uncovered that TNFR2 does not have a cell autonomous role in OPC differentiation, but may be important for survival of newly formed mature OLs. Finally, using an in vitro approach, we demonstrated that factors released by Tnfrsf1b ablated OPCs drove microglia to develop an exacerbated "foamy" phenotype when incubated with myelin-rich spinal cord homogenate, aberrantly increasing lysosomal lipid accumulation. Together, our data indicate that TNFR2 signaling in OPCs is protective by dampening their immune-inflammatory activation and by suppressing neurotoxic microglia reactivity. This suggests that boosting TNFR2 activation or its downstream cascades could be an effective strategy to restore OPC reparative capacity in neuroimmune and demyelinating disease.