Hyperexcitable neuronal networks are mechanistically linked to the pathologic and clinical features of Alzheimer's disease (AD). Astrocytes are a primary defense against hyperexcitability, but their functional phenotype during AD is poorly understood. Here, we found that activated astrocytes in the 5xFAD mouse model were strongly associated with proteolysis of the protein phosphatase calcineurin (CN) and the elevated expression of the CN-dependent transcription factor nuclear factor of activated T cells 4 (NFAT4). Intrahippocampal injections of adeno-associated virus vectors containing the astrocyte-specific promoter Gfa2 and the NFAT inhibitory peptide VIVIT reduced signs of glutamate-mediated hyperexcitability in 5xFAD mice, measured with microelectrode arrays and brain slices, using whole-cell voltage clamp. VIVIT treatment in 5xFAD mice led to increased expression of the astrocytic glutamate transporter GLT-1 and to attenuated changes in dendrite morphology, synaptic strength, and NMDAR-dependent responses. The results reveal astrocytic CN/NFAT4 as a key pathologic mechanism for driving glutamate dysregulation and neuronal hyperactivity during AD. Neuronal hyperexcitability and excitotoxicity are increasingly recognized as important mechanisms for neurodegeneration and dementia associated with Alzheimer's disease (AD). Astrocytes are profoundly activated during AD and may lose their capacity to regulate excitotoxic glutamate levels. Here, we show that a highly active calcineurin (CN) phosphatase fragment and its substrate transcription factor, nuclear factor of activated T cells (NFAT4), appear in astrocytes in direct proportion to the extent of astrocyte activation. The blockade of astrocytic CN/NFAT signaling in a common mouse model of AD, using adeno-associated virus vectors normalized glutamate signaling dynamics, increased astrocytic glutamate transporter levels and alleviated multiple signs of neuronal hyperexcitability. The results suggest that astrocyte activation drives hyperexcitability during AD through a mechanism involving aberrant CN/NFAT signaling and impaired glutamate transport.