Neurotropic viral infections continue to pose a serious threat to human and animal wellbeing. Host responses combatting the invading virus in these infections often cause irreversible damage to the nervous system, resulting in poor prognosis. Rabies is the most lethal neurotropic virus, which specifically infects neurons and spreads through the host nervous system by retrograde axonal transport. The key pathogenic mechanisms associated with rabies infection and axonal transmission in neurons remains unclear. Here we studied the pathogenesis of different field isolates of lyssavirus including rabies using ex-vivo model systems generated with mouse primary neurons derived from the peripheral and central nervous systems. In this study, we show that neurons activate selective and compartmentalized degeneration of their axons and dendrites in response to infection with different field strains of lyssavirus. We further show that this axonal degeneration is mediated by the loss of NAD and calpain-mediated digestion of key structural proteins such as MAP2 and neurofilament. We then analysed the role of SARM1 gene in rabies infection, which has been shown to mediate axonal self-destruction during injury. We show that SARM1 is required for the accelerated execution of rabies induced axonal degeneration and the deletion of SARM1 gene significantly delayed axonal degeneration in rabies infected neurons. Using a microfluidic-based ex-vivo neuronal model, we show that SARM1-mediated axonal degeneration impedes the spread of rabies virus among interconnected neurons. However, this neuronal defense mechanism also results in the pathological loss of axons and dendrites. This study therefore identifies a potential host-directed mechanism behind neurological dysfunction in rabies infection. This study also implicates a novel role of SARM1 mediated axonal degeneration in neurotropic viral infection.