Microglia are the resident macrophages of the CNS, which secrete several pro‐ and anti‐inflammatory cyto‐chemokines including interleukin‐1β (IL‐1β), in response to pathogenic stimuli. Once secreted, IL‐1β binds to IL‐1 receptor present on microglia and initiates the production of inflammatory cytokines in microglia. However, the detailed information regarding the molecular mechanisms of IL‐1β triggered inflammatory pathways in microglia is lacking. Our studies focused on the role of Krüppel‐like factor 4 (Klf4) in mediating the regulation of pro‐inflammatory gene expression upon IL‐1β stimulation in microglia. Our studies show that stimulation of microglia with IL‐1β robustly induces Klf4 via PI3K/Akt pathway which positively regulates the production of endogenous IL‐1β as well as other pro‐inflammatory markers, cyclooxygenase‐2, monocyte chemoattractant protein‐1 and interleukin‐6 (IL‐6). In addition, we report that Klf4 negatively regulates the expression of inducible nitric oxide synthase, thereby playing a key role in regulating the immunomodulatory activities of microglia. image IL‐1β is a potent pro‐inflammatory cytokine which regulates inflammation in brain via activation of microglia. In this regard, we unravelled mechanisms for IL‐1β mediated regulation of downstream Cox‐2, iNOS (inducible nitric oxide synthase) as well as other cyto‐chemokines in microglia and have established a role for Klf4 in mediating microglial activation. We further report that Klf4 mediates the production of endogenous IL‐1β in response to exogenous IL‐1β stimulation. We hereby propose a novel transcription factor underlying IL‐1β mediated modulation of inflammation in the CNS.