Mutations in INPP5D, which encodes for the SH2-domain-containing inositol phosphatase SHIP-1, have recently been linked to an increased risk of developing late-onset Alzheimer's disease. While INPP5D expression is almost exclusively restricted to microglia in the brain, little is known regarding how SHIP-1 affects neurobiology or neurodegenerative disease pathogenesis. We generated and investigated 5xFAD Inpp5dfl/fl Cx3cr1Ert2Cre mice to ascertain the function of microglial SHIP-1 signaling in response to amyloid beta (Aβ)-mediated pathology. SHIP-1 deletion in microglia led to substantially enhanced recruitment of microglia to Aβ plaques, altered microglial gene expression, and marked improvements in neuronal health. Further, SHIP-1 loss enhanced microglial plaque containment and Aβ engulfment when compared to microglia from Cre-negative 5xFAD Inpp5dfl/fl littermate controls. These results define SHIP-1 as a pivotal regulator of microglial responses during Aβ-driven neurological disease and suggest that targeting SHIP-1 may offer a promising strategy to treat Alzheimer's disease. Inpp5d deficiency in microglia increases plaque-associated microglia numbers. Loss of Inpp5d induces activation and phagocytosis transcriptional pathways. Plaque encapsulation and engulfment by microglia are enhanced with Inpp5d deletion. Genetic ablation of Inpp5d protects against plaque-induced neuronal dystrophy.