The discovery of TREM2 as a myeloid-specific Alzheimer's disease (AD) risk gene has accelerated research into the role of microglia in AD. While TREM2 mouse models have provided critical insight, the normal and disease-associated functions of TREM2 in human microglia remain unclear. To examine this question, we profile microglia differentiated from isogenic, CRISPR-modified TREM2-knockout induced pluripotent stem cell (iPSC) lines. By combining transcriptomic and functional analyses with a chimeric AD mouse model, we find that TREM2 deletion reduces microglial survival, impairs phagocytosis of key substrates including APOE, and inhibits SDF-1α/CXCR4-mediated chemotaxis, culminating in an impaired response to beta-amyloid plaques in vivo. Single-cell sequencing of xenotransplanted human microglia further highlights a loss of disease-associated microglial (DAM) responses in human TREM2 knockout microglia that we validate by flow cytometry and immunohistochemistry. Taken together, these studies reveal both conserved and novel aspects of human TREM2 biology that likely play critical roles in the development and progression of AD.