Toxoplasma gondii is a ubiquitous intracellular protozoan parasite that establishes a life-long chronic infection largely restricted to the central nervous system (CNS). Constant immune pressure, notably IFN-γ-STAT1 signaling, is required for preventing fatal pathology during T. gondii infection. Here, we report that abrogation of STAT1 signaling in microglia, the resident immune cells of the CNS, is sufficient to induce a loss of parasite control in the CNS and susceptibility to toxoplasmic encephalitis during the early stages of chronic infection. Using a microglia-specific genetic labeling and targeting system that discriminates microglia from blood-derived myeloid cells that infiltrate the brain during infection, we find that, contrary to previous in vitro reports, microglia do not express inducible nitric-oxide synthase (iNOS) during T. gondii infection in vivo. Instead, transcriptomic analyses of microglia reveal that STAT1 regulates both (i) a transcriptional shift from homeostatic to "disease-associated microglia" (DAM) phenotype conserved across several neuroinflammatory models, including T. gondii infection, and (ii) the expression of anti-parasitic cytosolic molecules that are required for eliminating T. gondii in a cell-intrinsic manner. Further, genetic deletion of Stat1 from microglia during T. gondii challenge leads to fatal pathology despite largely equivalent or enhanced immune effector functions displayed by brain-infiltrating immune populations. Finally, we show that microglial STAT1-deficiency results in the overrepresentation of the highly replicative, lytic tachyzoite form of T. gondii, relative to its quiescent, semi-dormant bradyzoite form typical of chronic CNS infection. Our data suggest an overall protective role of CNS-resident microglia against T. gondii infection, illuminating (i) general mechanisms of CNS-specific immunity to infection (ii) and a clear role for IFN-STAT1 signaling in regulating a microglial activation phenotype observed across diverse neuroinflammatory disease states.