Triggering receptor expressed on myeloid cells 2 (TREM2) is a transmembrane receptor protein predominantly expressed in microglia within the central nervous system (CNS). TREM2 regulates multiple microglial functions, including lipid metabolism, immune reaction, inflammation, and microglial phagocytosis. Recent studies have found that TREM2 is highly expressed in activated microglia after ischemic stroke. However, the role of TREM2 in the pathologic response after stroke remains unclear. Herein, TREM2-deficient microglia exhibit an impaired phagocytosis rate and cholesteryl ester (CE) accumulation, leading to lipid droplet formation and upregulation of Perilipin-2 (PLIN2) expression after hypoxia. Knockdown of TREM2 results in increased lipid synthesis (PLIN2, SOAT1) and decreased cholesterol clearance and lipid hydrolysis (LIPA, ApoE, ABCA1, NECH1, and NPC2), further impacting microglial phenotypes. In these lipid droplet-rich microglia, the TGF-β1/Smad2/3 signaling pathway is downregulated, driving microglia towards a pro-inflammatory phenotype. Meanwhile, in a neuron-microglia co-culture system under hypoxic conditions, we found that microglia lost their protective effect against neuronal injury and apoptosis when TREM2 was knocked down. Under in vivo conditions, TREM2 knockdown mice express lower TGF-β1 expression levels and a lower number of anti-inflammatory M2 phenotype microglia, resulting in increased cerebral infarct size, exacerbated neuronal apoptosis, and aggravated neuronal impairment. Our work suggests that TREM2 attenuates stroke-induced neuroinflammation by modulating the TGF-β1/Smad2/3 signaling pathway. TREM2 may play a direct role in the regulation of inflammation and also exert an influence on the post-ischemic inflammation and the stroke pathology progression via regulation of lipid metabolism processes. Thus, underscoring the therapeutic potential of TREM2 agonists in ischemic stroke and making TREM2 an attractive new clinical target for the treatment of ischemic stroke and other inflammation-related diseases.