GRN haploinsufficiency causes frontotemporal lobar degeneration and results in microglial hyperactivation, lysosomal dysfunction and TDP-43 deposition. To understand the contribution of microglial hyperactivation to pathology we evaluated genetic and pharmacological approaches suppressing TREM2 dependent transition of microglia from a homeostatic to a disease associated state. Trem2 deficiency in Grn KO mice led to a reduction of microglia activation. To explore antibody-mediated pharmacological modulation of TREM2-dependent microglial states, we identified antagonistic TREM2 antibodies. Treatment of macrophages from GRN-FTLD patients with these antibodies allowed a complete rescue of elevated levels of TREM2 together with increased shedding and reduction of TREM2 signaling. Furthermore, antibody-treated PGRN deficient hiMGL showed dampened microglial hyperactivation, reduced TREM2 signaling and phagocytic activity, however, lack of rescue of lysosomal dysfunction. Similarly, lysosomal dysfunction, lipid dysregulation and glucose hypometabolism of Grn KO mice were not rescued by TREM2 ablation. Furthermore, NfL, a biomarker for neurodegeneration, was elevated in the Grn/Trem2 KO. These findings suggest that microglia hyperactivation is not necessarily contributing to neurotoxicity, and instead demonstrates that TREM2 exhibits neuroprotective potential in this model.