Triggering receptor expressed on myeloid cells 2 (TREM2) is a transmembrane protein that is predominantly expressed by microglia in the brain. The proteolytic shedding of TREM2 results in the release of soluble TREM2 (sTREM2), which is increased in the cerebrospinal fluid of patients with Alzheimer’s disease (AD). It remains unknown whether sTREM2 regulates the pathogenesis of AD. Here we identified transgelin-2 (TG2) expressed on neurons as the receptor for sTREM2. The microglia-derived sTREM2 binds to TG2, induces RhoA phosphorylation at S188, and deactivates the RhoA-ROCK-GSK3β pathway, ameliorating tau phosphorylation. The sTREM2 (77-89) fragment, which is the minimal active sequence of sTREM2 to activate TG2, mimics the inhibitory effect of sTREM2 on tau phosphorylation. Overexpression of sTREM2 or administration of the active peptide rescues tau pathology and behavioral defects in the tau P301S transgenic mice. Together, these findings demonstrate that the sTREM2-TG2 interaction mediates the cross-talk between microglia and neurons. sTREM2 and its active peptide may be a potential therapeutic intervention for tauopathies including AD.