Background: Disease-associated-microglia (DAM) represent transcriptionally-distinct and neurodegeneration-specific microglial profiles with unclear significance in Alzheimer's disease (AD). An understanding of heterogeneity within DAM and their key regulators may guide pre-clinical experimentation and drug discovery. Methods: Weighted co-expression network analysis (WGCNA) was applied to existing microglial transcriptomic datasets from neuroinflammatory and neurodegenerative disease mouse models to identify modules of highly co-expressed genes. These modules were contrasted with known signatures of homeostatic microglia and DAM to reveal novel molecular heterogeneity within DAM. Flow cytometric validation studies were performed to confirm existence of distinct DAM sub-populations in AD mouse models predicted by WGCNA. Gene ontology analyses coupled with bioinformatics approaches revealed drug targets and transcriptional regulators of microglial modules predicted to favorably modulate neuroinflammation in AD. These guided in-vivo and in-vitro studies in mouse models of neuroinflammation and neurodegeneration (5xFAD) to determine whether inhibition of pro-inflammatory gene expression and promotion of amyloid clearance was feasible. We determined the human relevance of these findings by integrating our results with AD genome-wide association studies and human AD and non-disease post-mortem brain proteomes. Results: WGCNA applied to microglial gene expression data revealed a transcriptomic framework of microglial activation that predicted distinct pro-inflammatory and anti-inflammatory phenotypes within DAM, which we confirmed in AD and aging models by flow cytometry. Pro-inflammatory DAM emerged earlier in mouse models of AD and were characterized by pro-inflammatory genes (Tlr2, Ptgs2, Il12b, Il1b), surface marker CD44, potassium channel Kv1.3 and regulators (NFkb, Stat1, RelA) while anti-inflammatory DAM expressed phagocytic genes (Igf1, Apoe, Myo1e), surface marker CXCR4 with distinct regulators (LXRα/β, Atf1). As neuro-immunomodulatory strategies, we validated LXRα/β agonism and Kv1.3 blockade by ShK-223 peptide that promoted anti-inflammatory DAM, inhibited pro-inflammatory DAM and augmented Aβ clearance in AD models. Human AD-risk genes were highly represented within homeostatic microglia suggesting causal roles for early microglial dysregulation in AD. Pro-inflammatory DAM proteins were positively associated with neuropathology and preceded cognitive decline confirming the therapeutic relevance of inhibiting pro-inflammatory DAM in AD. Conclusions: We provide a predictive transcriptomic framework of microglial activation in neurodegeneration that can guide pre-clinical studies to characterize and therapeutically modulate neuroinflammation in AD.