Apolipoprotein E (APOE) {varepsilon}4 is the strongest genetic risk factor for Alzheimers disease (AD). Although its association with AD is well-established, the impact of APOE {varepsilon}4 on human brain cell function remains unclear. Here we investigated the effects of APOE {varepsilon}4 on several brain cell types derived from human induced pluripotent stem cells and human APOE targeted replacement mice. Gene set enrichment and pathway analyses of whole transcriptome profiles showed that APOE {varepsilon}4 is associated with dysregulation of cholesterol homeostasis in human but not mouse astrocytes and microglia. Elevated matrisome signaling associated with chemotaxis, glial activation and lipid biosynthesis in APOE {varepsilon}4 mixed neuron/astrocyte cultures parallels altered pathways uncovered in cell-type deconvoluted transcriptomic data from APOE {varepsilon}4 glia and AD post-mortem brains. Experimental validation of the transcriptomic findings showed that isogenic APOE {varepsilon}4 is associated with increased lysosomal cholesterol levels and decreased cholesterol efflux, demonstrating decoupled lipid metabolism. APOE {varepsilon}4 glia also secrete higher levels of proinflammatory chemokines, cytokines and growth factors, indicative of glial activation. Thus, APOE {varepsilon}4 induces human glia-specific dysregulation that may initiate AD risk.