Despite the widespread use of antiretroviral therapy that effectively limits viral replication, memory impairment remains a dilemma for HIV infected people. In the CNS, HIV infection of astrocytes leads to the production of the HIV-1 Nef protein without viral replication. Post mortem studies have found Nef expression in hippocampal astrocytes of people with HIV associated dementia suggesting that astrocytic Nef may contribute to HIV associated cognitive impairment even when viral replication is suppressed. To test whether astrocytic expression of Nef is sufficient to induce cognitive deficits, we examined the effect of implanting primary rat astrocytes expressing Nef into the hippocampus on spatial and recognition memory. Rats implanted unilaterally with astrocytes expressing Nef showed impaired novel location and novel object recognition in comparison with controls implanted with astrocytes expressing green fluorescent protein (GFP). This impairment was correlated with an increase in chemokine ligand 2 (CCL2) expression and the infiltration of peripheral macrophages into the hippocampus at the site of injection. Furthermore, the Nef exposed rats exhibited a bilateral loss of CA3 neurons. These results suggest that Nef protein expressed by the implanted astrocytes activates the immune system leading to neuronal damage and spatial and recognition memory deficits. Therefore, the continued expression of Nef by astrocytes in the absence of viral replication has the potential to contribute to HIV associated cognitive impairment.