Microglia, the resident immune cells of the brain, have important roles in brain health. However, little is known about the regulation and consequences of microglial activation in the aging human brain. Here we report that the proportion of morphologically activated microglia (PAM) in postmortem cortical tissue is strongly associated with β-amyloid, tau-related neuropathology, and the rate of cognitive decline. Effect sizes for PAM measures are substantial, comparable to that of APOE ε4, the strongest genetic risk factor for Alzheimer's disease, and mediation models support an upstream role for microglial activation in Alzheimer's disease via accumulation of tau. Further, we identify a common variant (rs2997325) influencing PAM that also affects in vivo microglial activation measured by C-PBR28 PET in an independent cohort. Thus, our analyses begin to uncover pathways regulating resident neuroinflammation and identify overlaps of PAM's genetic architecture with those of Alzheimer's disease and several other traits.