Abstract Background Cytoplasmic inclusions of transactive response DNA binding protein of 43 kDa (TDP-43) in neurons and astrocytes are a feature of some neurodegenerative diseases, such as frontotemporal lobar degeneration with TDP-43 (FTLD-TDP) and amyotrophic lateral sclerosis (ALS). However, the role of TDP-43 in astrocyte pathology remains largely unknown. Methods To investigate whether TDP-43 overexpression in primary astrocytes could induce inflammation, we transfected primary astrocytes with plasmids encoding Gfp or TDP-43-Gfp. The inflammatory response and upregulation of PTP1B in transfected cells were examined using quantitative RT-PCR and immunoblot analysis. Neurotoxicity was analysed in a transwell coculture system of primary cortical neurons with astrocytes and cultured neurons treated with astrocyte-conditioned medium (ACM). We also examined the lifespan, performed climbing assays and analysed immunohistochemical data in pan-glial TDP-43-expressing flies in the presence or absence of a Ptp61f RNAi transgene. Results PTP1B inhibition suppressed TDP-43-induced secretion of inflammatory cytokines (interleukin 1 beta (IL-1β), interleukin 6 (IL-6) and tumour necrosis factor alpha (TNF-α)) in primary astrocytes. Using a neuron-astrocyte coculture system and astrocyte-conditioned media treatment, we demonstrated that PTP1B inhibition attenuated neuronal death and mitochondrial dysfunction caused by overexpression of TDP-43 in astrocytes. In addition, neuromuscular junction (NMJ) defects, a shortened lifespan, inflammation and climbing defects caused by pan-glial overexpression of TDP-43 were significantly rescued by downregulation of ptp61f (the Drosophila homologue of PTP1B) in flies. Conclusions These results indicate that PTP1B inhibition mitigates the neuronal toxicity caused by TDP-43-induced inflammation in mammalian astrocytes and Drosophila glial cells.