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Abstract Neuromyelitis optica spectrum disorder (NMOSD) is an inflammatory demyelinating disorder of the central nervous system (CNS) triggered by autoimmune mechanisms. Microglia are activated and play a pivotal role in response to tissue injury. Triggering receptor expressed on myeloid cells 2 (TREM2) is expressed by microglia and promotes microglial activation, survival and phagocytosis. Here, we identify a critical role for TREM2 in microglial activation and function during AQP4-IgG and complement-induced demyelination. TREM2-deficient mice had more severe tissue damage and neurological impairment, as well as fewer oligodendrocytes with suppressed proliferation and maturation. The number of microglia clustering in NMOSD lesions and their proliferation were reduced in TREM2-deficient mice. Moreover, morphology analysis and expression of classic markers showed compromised activation of microglia in TREM2-deficient mice, which was accompanied by suppressed phagocytosis and degradation of myelin debris by microglia. These results overall indicate that TREM2 is a key regulator of microglial activation and exert neuroprotective effects in NMOSD demyelination. Graphical Abstract