During infections, TLR-mediated responses require tight regulation to allow for pathogen removal, while preventing overwhelming inflammation and immunopathology. The triggering receptor expressed on myeloid cells (TREM)-2 negatively regulates inflammation by macrophages and impacts on phagocytosis, but the function of endogenous TREM-2 during infections is poorly understood. We investigated TREM-2’s role in regulating TLR4-mediated inflammation by studying wild-type and TREM-2−/− mice challenged with LPS and found TREM-2 to dampen early inflammation. Augmented early inflammation in TREM-2−/− animals was followed by an accelerated resolution and ultimately improved survival, associated with the induction of the negative regulator A20. Upon infection with Escherichia coli, the otherwise beneficial effect of an exaggerated early immune response in TREM-2−/− animals was counteracted by a 50% reduction in bacterial phagocytosis. In line with this, TREM-2−/− peritoneal macrophages (PMs) exhibited augmented inflammation following TLR4 stimulation, demonstrating the presence and negative regulatory functionality of TREM-2 on primary PMs. Significantly, we identified a high turnover rate because TREM-2 RNA is 25-fold down-regulated and the protein proteasomally degraded upon LPS encounter, thus ensuring a tightly regulated and versatile system that modulates inflammation. Our results illustrate TREM-2’s effects on infection-triggered inflammation and identify TREM-2 as a potential target to prevent overwhelming inflammation while preserving antibacterial-effector functions.