Intravitreal injection of the microglia inhibitor tuftsin 1-3 leads to an increase in retinal ganglion cell axonal regeneration into peripheral nerve grafts and a decrease in phagocytic cells in the retina. However, the relation of phagocytic cells and particularly microglia towards axonal regeneration remains unclear. Initially, to assess this, tuftsin 1-3's effect on axonal regeneration was reexamined by doing a dose-response study. Optimal doses were found to be 2.5 microg/ml and 250 microg/ml in rats and hamsters respectively. We then studied retinal phagocytic cells in rats. Microglial cells were classified as resting or activated based on their morphology following OX42 immunolabelling. In controls, most microglial cells were in the resting state. Optic nerve cut led to an increase in the total number of microglia and a ten-fold elevation in the proportion of activated cells; changes were more pronounced at the optic nerve stump. Anastomosis of an autologous segment of sciatic nerve to the stump of the freshly cut optic nerve minimized the overall increase in microglia, and combined with 2.5 microg/ml tuftsin 1-3, lead to a marked blunting of activation. Preservation within the retina of a higher proportion of resting over active form of microglia, and not the prevention of microglial proliferation per se, may be a crucial factor in allowing additional retinal ganglion cell axons to regenerate into peripheral nerve grafts.