Inflammation and oxidative stress play important roles in the pathogenesis of neurodegenerative disorders such as stroke, traumatic injury, Parkinson disease, and Alzheimer disease. Paeonol, a natural compound extracted from Moutan cortex, is a potent anti-inflammatory and antioxidative agent. The aim of this study was to investigate the neuroprotective mechanisms of paeonol on lipopolysaccharide (LPS)-induced inflammation in rat primary microglia and 6-hydroxydopamine-induced oxidative damage in cortical neurons. In LPS-treated microglia, paeonol attenuated the overexpression of inducible nitric oxide synthase and cyclooxygenase 2, leading to the decrease in nitric oxide and prostaglandin E2 production, respectively. Paeonol also suppressed LPS-induced phosphorylation of extracellular signal-regulated kinase and Jun N-terminal kinase. In addition, LPS-stimulated NADPH oxidase activation and reactive oxygen species production were attenuated by paeonol. Paeonol-induced upregulation of heme oxygenase 1 was also observed. Moreover, paeonol attenuated LPS-treated microglia culture medium-induced neuron cells death. Posttreatment with paeonol also reduced inflammatory responses in LPS-activated microglia and increased cell viability in LPS-treated microglia culture medium-treated neurons. Furthermore, in 6-hydroxydopamine-treated cortical neurons, paeonol not only decreased reactive oxygen species production but also increased cell viability, superoxide dismutase activity, and the antiapoptotic protein B-cell lymphoma 2 expression. Taken together, the present results suggest that paeonol might be a potential neuroprotective agent via inhibiting microglia-mediated inflammation and oxidative stress-induced neuronal damage.