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Abstract Background Acute liver failure resulting from drug-induced liver injury can lead to the development of neurological complications called hepatic encephalopathy (HE). Hepatic transforming growth factor beta 1 (TGFβ1) is upregulated due to liver failure in mice and inhibiting circulating TGFβ reduced HE progression. However, the specific contributions of TGFβ1 on brain cell populations and neuroinflammation during HE are not known. Therefore, the aim of this study was to characterize hepatic and brain TGFβ1 signaling during acute liver failure and its contribution to HE progression using a combination of pharmacological and genetic approaches. Methods C57Bl/6 or neuron-specific transforming growth factor beta receptor 2 (TGFβR2) null mice (TGFβR2ΔNeu) were treated with azoxymethane (AOM) to induce acute liver failure and HE. The activity of circulating TGFβ1 was inhibited in C57Bl/6 mice via injection of a neutralizing antibody against TGFβ1 (anti-TGFβ1) prior to AOM injection. In all mouse treatment groups, liver damage, neuroinflammation, and neurological deficits were assessed. Inflammatory signaling between neurons and microglia were investigated in in vitro studies through the use of pharmacological inhibitors of TGFβ1 signaling in HT-22 and EOC-20 cells. Results TGFβ1 was expressed and upregulated in the liver following AOM injection. Pharmacological inhibition of TGFβ1 after AOM injection attenuated neurological decline, microglia activation, and neuroinflammation with no significant changes in liver damage. TGFβR2ΔNeu mice administered AOM showed no effect on liver pathology but significantly reduced neurological decline compared to control mice. Microglia activation and neuroinflammation were attenuated in mice with pharmacological inhibition of TGFβ1 or in TGFβR2ΔNeu mice. TGFβ1 increased chemokine ligand 2 (CCL2) and decreased C-X3-C motif ligand 1 (CX3CL1) expression in HT-22 cells and reduced interleukin-1 beta (IL-1ß) expression, tumor necrosis factor alpha (TNFα) expression, and phagocytosis activity in EOC-20 cells. Conclusion Increased circulating TGFβ1 following acute liver failure results in activation of neuronal TGFβR2 signaling, driving neuroinflammation and neurological decline during AOM-induced HE.