Extracellular proTGF-? is covalently linked to "milieu" molecules in the matrix or on cell surfaces and is latent until TGF-? is released by integrins. Here, we show that LRRC33 on the surface of microglia functions as a milieu molecule and enables highly localized, integrin-?V?8-dependent TGF-? activation. Lrrc33-/- mice lack CNS vascular abnormalities associated with deficiency in TGF-?-activating integrins but have microglia with a reactive phenotype and after 2 months develop ascending paraparesis with loss of myelinated axons and death by 5 months. Whole bone marrow transplantation results in selective repopulation of Lrrc33-/- brains with WT microglia and halts disease progression. The phenotypes of WT and Lrrc33-/- microglia in the same brain suggest that there is little spreading of TGF-? activated from one microglial cell to neighboring microglia. Our results suggest that interactions between integrin-bearing cells and cells bearing milieu molecule-associated TGF-? provide localized and selective activation of TGF-?.