In demyelinating diseases such as multiple sclerosis (MS), an imbalance between the demyelination and remyelination rates underlies the degenerative processes. Microglial activation is observed in demyelinating lesions; however, the molecular mechanism responsible for the homeostatic/environmental change remains elusive. We previously found that cystatin F (CysF), a cysteine protease inhibitor, is selectively expressed in microglia only in actively demyelinating/remyelinating lesions but ceases expression in chronic lesions, suggesting its role in remyelination. Here, we report the effects of manipulating the expression of CysF and cathepsin C (CatC), a key target of CysF, in a murine model of transgenic demyelinating disease, Plp^4e/‐. During the active remyelinating phase, both CysF knockdown (CysFKD) and microglial‐selective CatC overexpression (CatCOE) showed a worsening of the demyelination in Plp^4e/‐ transgenic mice. Conversely, during the chronic demyelinating phase, CatC knockdown (CatCKD) ameliorated the demyelination. Our results suggest that the balance between CatC and CysF expression controls the demyelination and remyelination process.