Interferons (IFNs) are implicated as an important component of the innate immune system influencing viral infections, inflammation, and immune surveillance. We review here the complex biological activity of IFNs in the central nervous system (CNS) and associated glial-immune interactions, with focus specifically on the Type I IFNs in physiological and pathological conditions. IFN-α and IFN-β are the predominant Type I IFNs in the CNS. They are produced in the CNS by glial cells, mostly microglia and astrocytes, as well as by neurons. A variety of mechanisms stimulate IFN production in glial cells, including innate stimuli from Toll-like and other receptors, which can recognize endogenous entities, as well as pathogens. We will review evidence that differential signaling by IFN-α versus IFN-β through the common heterodimeric receptor IFNAR is the basis for CNS-selective Type I IFN response, and the capacity of CNS glial cells to produce and respond to Type I IFN. Differential signaling outcomes of IFN-α and IFN-β, which have been ascribed to differential affinity for IFNAR1 and IFNAR2, determine whether Type I IFN exert pathogenic or protective roles in the CNS. These points will be discussed with reference to selected neurological diseases, and effects of Type I IFN on the integrity of the blood-brain barrier.