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Since microglia-associated neuroinflammation plays a critical role in the progression of acute spinal cord injury, modulation of microglial activation has been suggested as a potential therapeutic strategy. Progranulin has been reported to exert neuroprotective effects by attenuating neuroinflammation, but whether these effects are due to the modulation of microglial polarization and the underlying mechanism remain unclear. Here, we investigated the effect of progranulin on microglial polarization and analyzed the crosstalk between microglial autophagy and polarization. We found that progranulin could reduce proinflammatory cytokine production in the lesion site and promote locomotor functional recovery after acute spinal cord injury. In vitro, we found that progranulin could activate microglia to an anti-inflammatory phenotype and express IL-10. Moreover, progranulin-mediated enhancement of anti-inflammatory microglial polarization was attributed to the protection of lysosomal function and the enhancement of autophagic flux. Above all, progranulin exerts anti-inflammatory effects by protecting lysosomal function to enhance microglial autophagy to induce M2 microglial polarization and ultimately improves neurological function after acute spinal cord injury. These results suggest that targeting autophagy-lysosomal pathway to modulate microglial polarization to reduce neuroinflammation is a potential treatment for spinal cord injury.