Multiple sclerosis (MS) shows a highly heterogeneous course, with some patients accumulating severe disability early while others remain relatively preserved even after decades. A key driver of disability progression is smoldering inflammation, a chronic, compartmentalized immune process at the edge of chronic active lesions. However, the factors driving smoldering inflammation in MS remain incompletely understood. We investigated the role of genetic variation in smoldering inflammation-related genes across two independent MS cohorts, using a discovery-replication design in a total of 2,817 patients. We identified a locus in the HIF1A (Hypoxia-Inducible Factor 1-alpha) gene that is associated with a more favorable disease course at over 20 years from disease onset. Using additional independent cohorts, we found that carriers of the HIF1A protective allele exhibited lower paramagnetic rim lesion volume on MRI, lower plasma and cerebrospinal fluid neurofilament levels, and reduced microglial/macrophage inflammation with less axonal injury in post-mortem progressive MS tissue. By integrating single-nucleus RNA sequencing and spatial transcriptomics, we showed that the HIF1A variant dynamically modulates gene expression in a cell-type specific and context-dependent manner in the MS brain. Collectively, these findings highlight a protective HIF1A variant associated with a more favourable long-term disease course and reduced smoldering inflammation, opening new avenues to translate this genetic discovery into new potential strategies to tackle disease progression.