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Multiple sclerosis (MS) is a chronic neuroinflammatory disease characterized by demyelination and axonal degeneration. Astrocytes have emerged as pivotal regulators of MS pathology, playing both pathogenic and regulatory roles. This review explores the mechanisms underlying astrocyte heterogeneity in MS, with a focus on how astrocyte functional states are influenced by extrinsic environmental factors such as inflammatory signals and dynamic interactions with immune cells and other glial populations. We discuss how the astrocyte heterogeneity established during development and further modulated by local environmental factors influences lesion formation, blood-brain barrier integrity, and tissue repair. We further outline protective and pathogenic astrocyte states together with the molecular mechanisms that govern neuroinflammatory responses. Finally, we highlight emerging therapeutic strategies for modulating astrocyte pathogenic responses. Collectively this work highlights astrocyte functional heterogeneity as a central feature of MS pathology and an emerging therapeutic opportunity for progressive MS.