Influenza-associated encephalopathy (IAE) is a serious complication that can follow influenza virus infection. Once a cytokine storm is induced during influenza virus infection, tight junction protein disruption occurs, which consequently leads to blood-brain barrier (BBB) breakdown. However, the details of IAE pathogenesis are not well understood. Here, we established a murine IAE model by administration of lipopolysaccharide following influenza virus infection. Brains from IAE model mice had significantly higher expression of type I interferons and inflammatory cytokines. In addition, the expression of Caveolin-1, one of the key proteins that correlate with protection of the BBB, was significantly lower in brains from the IAE group compared with the control group. We also found that, among 84 different histone modification enzymes, only SET domain bifurcated 2 (Setdb2), one of the histone methyltransferases that methylates the lysine 9 of histone H3, showed significantly higher expression in the IAE group compared with the control group. Furthermore, chromatin immunoprecipitation revealed that methylation of histone H3 lysine 9 was correlated with repression of the Caveolin-1 promoter region. These studies identify Caveolin-1 as a key regulator of BBB permeability in IAE and reveal that it acts through histone modification induced by Setdb2.