Triggering receptor expressed on myeloid cells 2 (TREM2) is a DAP12-associated receptor expressed in microglia, macrophages, and other myeloid-derived cells. Previous studies have suggested that TREM2/DAP12 signaling pathway reduces inflammatory responses and promotes phagocytosis of apoptotic neurons. Recently, TREM2 has been identified as a risk gene for Alzheimer disease (AD). Here, we show that DAP12 stabilizes the C-terminal fragment of TREM2 (TREM2-CTF), a substrate for γ-secretase. Co-expression of DAP12 with TREM2 selectively increased the level of TREM2-CTF with little effects on that of full-length TREM2. The interaction between DAP12 and TREM2 is essential for TREM2-CTF stabilization as a mutant form of DAP12 with disrupted interaction with TREM2 failed to exhibit such an effect. Silencing of either Trem2 or Dap12 gene significantly exacerbated pro-inflammatory responses induced by lipopolysaccharides (LPS). Importantly, overexpression of either full-length TREM2 or TREM2-CTF reduced LPS-induced inflammatory responses. Taken together, our results support a role of DAP12 in stabilizing TREM2-CTF, thereby protecting against excessive pro-inflammatory responses. TREM2 is a DAP12-coupled receptor associated with neurodegenerative diseases. Co-expression of DAP12 increased the level of TREM2 C-terminal fragment (TREM2-CTF) which suppressed the release of pro-inflammatory cytokines. A major function of DAP12 is to stabilize TREM2-CTF, which regulates inflammatory responses in microglia. Our studies unraveled a novel function of DAP12 and provided new link between TREM2/DAP12 complexes and neuroinflammation.