Apolipoprotein E4 (APOE4) genotype is the strongest genetic risk factor for late-onset Alzheimer disease and confers a proinflammatory, neurotoxic phenotype to microglia. Here, we tested the hypothesis that bone marrow cell APOE genotype modulates pathological progression in experimental Alzheimer disease. We performed bone marrow transplants (BMT) from green fluorescent protein expressing human APOE3/3 or APOE4/4 donor mice into lethally irradiated 5-month-old APPswe/PS1ΔE9 mice. Eight months later, APOE4/4 BMT-recipient APPswe/PS1ΔE9 mice had significantly impaired spatial working memory and increased detergent-soluble and plaque Aβ compared with APOE3/3 BMT recipient APPswe/PS1DE9 mice. BMT-derived microglia engraftment was significantly reduced in APOE4/4 recipients, who also had correspondingly less cerebral apoE. Gene expression analysis in cerebral cortex of APOE3/3 BMT-recipients showed reduced expression of tumor necrosis factor-α and macrophage migration inhibitory factor (both neurotoxic cytokines) and elevated immunomodulatory IL-10 expression in APOE3/3 recipients compared with those that received APOE4/4 bone marrow. This was not due to detectable APOE-specific differences in expression of microglial major histocompatibility complex class II, C-C chemokine receptor (CCR) type 1, CCR2, CX3C chemokine receptor 1 (CX3CR1), or C5a anaphylatoxin chemotactic receptor (C5aR). Together, these findings suggest that BMT-derived APOE3-expressing cells are superior to those that express APOE4 in their ability to mitigate the behavioral and neuropathological changes in experimental Alzheimer disease.