Lipid-rich myelin membranes are a major target of immune attacks in chronic neurological disorders such as multiple sclerosis (MS). Following an acute demyelinating event, damaged myelin is cleared by phagocytes and new myelin sheaths are generated from existing or newly differentiated oligodendrocytes. Our previous studies shed light on the critical impact of functional lipid recycling pathways within phagocytes to enable remyelination of acute lesion. However, to date it is unclear how chronic progressive disease is linked to lipid metabolic pathways. According to the ‘inside-out’ concept of MS, an unknown primary degenerative process targets the myelin-oligodendrocyte complex inducing neuroinflammation. Therefore, in this study we compared the microglial lipid metabolic and inflammatory program following an acute demyelinating insult (Cuprizone, Lysolecithin) with a mouse model of chronic progressive myelin pathology / leukodystrophy (PLP1Tg). To our surprise, microglia in chronic demyelinating pathology showed dysregulated lipid metabolic pathways. Single cell transcriptional analysis revealed the gradual increase of a distinct microglia subcluster in PLP1Tg mice. Finally, while classical anti-inflammatory treatments failed to rescue chronic myelin degeneration, supporting the lipid recycling pathway by administration of a direct liver x receptor agonist significantly delayed disease progression. Taken together, our data indicates that persistent myelin pathology triggers ineffective lipid recycling ultimately driving disease progression.