Proregenerative responses are required for the restoration of nervous-system functionality in demyelinating diseases such as multiple sclerosis (MS). Yet, the limiting factors responsible for poor CNS repair are only partially understood. Here, we test the impact of a Western diet (WD) on phagocyte function in a mouse model of demyelinating injury that requires microglial innate immune function for a regenerative response to occur. We find that WD feeding triggers an ageing-related, dysfunctional metabolic response that is associated with impaired myelin-debris clearance in microglia, thereby impairing lesion recovery after demyelination. Mechanistically, we detect enhanced transforming growth factor beta (TGFβ) signalling, which suppresses the activation of the liver X receptor (LXR)-regulated genes involved in cholesterol efflux, thereby inhibiting phagocytic clearance of myelin and cholesterol. Blocking TGFβ or promoting triggering receptor expressed on myeloid cells 2 (TREM2) activity restores microglia responsiveness and myelin-debris clearance after demyelinating injury. Thus, we have identified a druggable microglial immune checkpoint mechanism regulating the microglial response to injury that promotes remyelination.