The bark of magnolia has been used in Oriental medicine to treat a variety of remedies, including some neurological disorders. Magnolol (Mag) and honokiol (Hon) are isomers of polyphenolic compounds from the bark of Magnolia officinalis, and have been identified as major active components exhibiting anti-oxidative, anti-inflammatory, and neuroprotective effects. In this study, we investigate the ability of these isomers to suppress oxidative stress in neurons stimulated by the ionotropic glutamate receptor agonist N-methyl-D-aspartate (NMDA) and oxidative and inflammatory responses in microglial cells activated by interferon-γ (IFNγ) and lipopolysaccharide (LPS). We also attempt to elucidate the mechanism and signaling pathways involved in cytokine-induced production of reactive oxygen species (ROS) in microglial cells. Dihydroethidium (DHE) was used to assay superoxide production in neurons, while CM-H2DCF-DA was used to test for ROS production in murine (BV-2) and rat (HAPI) immortalized microglial cells. NADPH oxidase inhibitors (for example, diphenyleneiodonium (DPI), AEBSF, and apocynin) and immunocytochemistry targeting p47phox and gp91phox were used to assess the involvement of NADPH oxidase. Western blotting was used to assess iNOS and ERK1/2 expression, and the Griess reaction protocol was employed to determine nitric oxide (NO) concentration. Exposure of Hon and Mag (1–10 μM) to neurons for 24 h did not alter neuronal viability, but both compounds (10 μM) inhibited NMDA-stimulated superoxide production, a pathway known to involve NADPH oxidase. In microglial cells, Hon and Mag inhibited IFNγ±LPS-induced iNOS expression, NO, and ROS production. Studies with inhibitors and immunocytochemical assay further demonstrated the important role of IFNγ activating the NADPH oxidase through the p-ERK-dependent pathway. Hon and, to a lesser extent, Mag inhibited IFNγ-induced p-ERK1/2 and its downstream pathway for ROS and NO production. This study highlights the important role of NADPH oxidase in mediating oxidative stress in neurons and microglial cells and has unveiled the role of IFNγ in stimulating the MAPK/ERK1/2 signaling pathway for activation of NADPH oxidase in microglial cells. Hon and Mag offer anti-oxidative or anti-inflammatory effects, at least in part, through suppressing IFNγ-induced p-ERK1/2 and its downstream pathway.