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Previously, we reported that H157Y, a rare coding variant on exon 3 of the triggering receptor expressed on myeloid cells 2 gene (<i>TREM2</i>), was associated with Alzheimer’s disease (AD) risk in a Han Chinese population. To date, how this variant increases AD risk has remained unclear. In this study, using CRISPR-Cas9-engineered BV2 microglia, we tried to investigate the influence of the <i>Trem2</i> H157Y variant on AD-related microglial functions. For the first time, we revealed that the <i>Trem2</i> H157Y variant inhibits microglial phagocytosis of amyloid-β, promotes M1-type polarization of microglia, and facilitates microglial release of inflammatory cytokines, including interleukin (IL)-1β, IL-6, and tumor necrosis factor-α. These findings provide new insights into the cellular mechanisms by which the <i>TREM2</i> H157Y variant elevates the risk of AD.