Following CNS injury, astrocytes become "reactive" and exhibit pro-regenerative or harmful properties. However, the molecular mechanisms that cause astrocytes to adopt either phenotype are not well understood. Transglutaminase 2 (TG2) plays a key role in regulating the response of astrocytes to insults. Here, we used mice in which TG2 was specifically deleted in astrocytes (Gfap-Cre+/- TG2fl/fl, referred to here as TG2-A-cKO) in a spinal cord contusion injury (SCI) model. Deletion of TG2 from astrocytes resulted in a significant improvement in motor function following SCI. GFAP and NG2 immunoreactivity, as well as number of SOX9 positive cells, were significantly reduced in TG2-A-cKO mice. RNA-seq analysis of spinal cords from TG2-A-cKO and control mice 3 days post-injury identified thirty-seven differentially expressed genes, all of which were increased in TG2-A-cKO mice. Pathway analysis revealed a prevalence for fatty acid metabolism, lipid storage and energy pathways, which play essential roles in neuron-astrocyte metabolic coupling. Excitingly, treatment of wild type mice with the selective TG2 inhibitor VA4 significantly improved functional recovery after SCI, similar to what was observed using the genetic model. These findings indicate the use of TG2 inhibitors as a novel strategy for the treatment of SCI and other CNS injuries.