Neuroinflammation and microglial activation are significant processes in Alzheimer's disease pathology. Recent genome-wide association studies have highlighted multiple immune-related genes in association with Alzheimer's disease, and experimental data have demonstrated microglial proliferation as a significant component of the neuropathology. In this study, we tested the efficacy of the selective CSF1R inhibitor JNJ-40346527 (JNJ-527) in the P301S mouse tauopathy model. We first demonstrated the anti-proliferative effects of JNJ-527 on microglia in the ME7 prion model, and its impact on the inflammatory profile, and provided potential CNS biomarkers for clinical investigation with the compound, including pharmacokinetic/pharmacodynamics and efficacy assessment by TSPO autoradiography and CSF proteomics. Then, we showed for the first time that blockade of microglial proliferation and modification of microglial phenotype leads to an attenuation of tau-induced neurodegeneration and results in functional improvement in P301S mice. Overall, this work strongly supports the potential for inhibition of CSF1R as a target for the treatment of Alzheimer's disease and other tau-mediated neurodegenerative diseases.