Amyloid-β peptide (Aβ) accumulation in the brain is a hallmark of Alzheimer's Disease. An important mechanism of Aβ clearance in the brain is uptake and degradation by microglia. Presenilin 1 (PS1) is the catalytic subunit of γ-secretase, an enzyme complex responsible for the maturation of multiple substrates, such as Aβ. Although PS1 has been extensively studied in neurons, the role of PS1 in microglia is incompletely understood. Here we report that microglia containing phospho-deficient mutant PS1 display a slower kinetic response to micro injury in the brain in vivo and the inability to degrade Aβ oligomers due to a phagolysosome dysfunction. An Alzheimer's mouse model containing phospho-deficient PS1 show severe Aβ accumulation in microglia as well as the postsynaptic protein PSD95. Our results demonstrate a novel mechanism by which PS1 modulates microglial function and contributes to Alzheimer's -associated phenotypes.