Triggering receptor expressed on myeloid cells 2 (TREM2) gene is a recently identified susceptibility gene for Alzheimer's disease (AD), as its low-frequency variants increase the risk of this disease with an odds ratio similar to that of an APOE ɛ4 allele. To date, the expression and biologic functions of TREM2 under AD context remain largely unknown. Using APPswe/PS1dE9 mice, a transgenic model of AD, we showed that TREM2 was upregulated in microglia during disease progression. For the first time, we provided in vitro and in vivo evidence that this upregulation was attributed to the increased amyloid-β (Aβ)(1-42) levels in the brain. By knockdown and overexpression of TREM2 in cultured primary microglia, we revealed that TREM2 modulated microglial functions under AD context, as it facilitated Aβ(1-42) phagocytosis and inhibited Aβ(1-42)-triggered proinflammatory responses. Meanwhile, this modulation was dependent on DAP12, the adapter protein of TREM2. More importantly, overexpression of TREM2 in the brain of APPswe/PS1dE9 mice markedly ameliorated AD-related neuropathology including Aβ deposition, neuroinflammation, and neuronal and synaptic losses, which was accompanied by an improvement in spatial cognitive functions. Taken together, our data suggest that the upregulation of TREM2 serves as a compensatory response to Aβ(1-42) and subsequently protects against AD progression by modulation of microglia functions. These findings provide insights into the role of TREM2 in AD pathogenesis, and highlight TREM2 as a potential therapeutic target for this disease.