Multiple System Atrophy (MSA) is a rare, age-related neurodegenerative disease that shares clinical and pathological features with Parkinson’s disease (PD) but presents a more devastating disease course. To elucidate the distinct cellular pathophysiology, we performed single-nucleus RNA sequencing on postmortem striatal brain tissue from 7 MSA and 12 PD patients, and 10 non-neurological cases. Compositional analysis revealed significant differences in astroglia and microglia subtypes, while oligodendroglia and neurons were comparable. PD brains showed abundant microglia expressing class 2 HLA haplotypes, indicative of proinflammatory state, alongside increased homeostatic astrocytes. In contrast, MSA lacked activated microglia but had more reactive astrocytes compared to PD. Transcriptomic analysis suggests compromised oligodendrocyte signaling in MSA, with microglia being in a state of immune tolerance or exhaustion. Microglia derived from iPSC exposed to patient CSF exhibited reduced phagocytic activity, especially in MSA. These findings underscore a dysfunctional immune response in MSA as central to its more severe pathophysiology.