Abstract Background Hypoxic-ischemic encephalopathy (HIE) is a serious birth complication with high incidence in both advanced and developing countries. Children surviving from HIE often have severe long-term sequela including cerebral palsy, epilepsy, and cognitive disabilities. The severity of HIE in infants is tightly associated with increased IL-1β expression and astrocyte activation which was regulated by transient receptor potential vanilloid 1 (TRPV1), a non-selective cation channel in the TRP family. Methods Neonatal hypoxic ischemia (HI) and oxygen-glucose deprivation (OGD) were used to simulate HIE in vivo and in vitro. Primarily cultured astrocytes were used for investigating the expression of glial fibrillary acidic protein (GFAP), IL-1β, Janus kinase 2 (JAK2), signal transducer and activator of transcription 3 (STAT3), and activation of the nucleotide-binding, oligomerization domain (NOD)-like receptor pyrin domain-containing protein 3 (NLRP3) inflammasome by using Western blot, q-PCR, and immunofluorescence. Brain atrophy, infarct size, and neurobehavioral disorders were evaluated by Nissl staining, 2,3,5-triphenyltetrazolium chloride monohydrate (TTC) staining and neurobehavioral tests (geotaxis reflex, cliff aversion reaction, and grip test) individually. Results Astrocytes were overactivated after neonatal HI and OGD challenge. The number of activated astrocytes, the expression level of IL-1β, brain atrophy, and shrinking infarct size were all downregulated in TRPV1 KO mice. TRPV1 deficiency in astrocytes attenuated the expression of GFAP and IL-1β by reducing phosphorylation of JAK2 and STAT3. Meanwhile, IL-1β release was significantly reduced in TRPV1 deficiency astrocytes by inhibiting activation of NLRP3 inflammasome. Additionally, neonatal HI-induced neurobehavioral disorders were significantly improved in the TRPV1 KO mice. Conclusions TRPV1 promotes activation of astrocytes and release of astrocyte-derived IL-1β mainly via JAK2-STAT3 signaling and activation of the NLRP3 inflammasome. Our findings provide mechanistic insights into TRPV1-mediated brain damage and neurobehavioral disorders caused by neonatal HI and potentially identify astrocytic TRPV1 as a novel therapeutic target for treating HIE in the subacute stages (24 h).