Microglia are generally considered the immune cells of the central nervous system. Recent studies have demonstrated that under specific polarization conditions, microglia develop into two different phenotypes, termed M1‐like and M2‐like microglia. However, the phenotypic characteristics of M1‐like‐ and M2‐like‐polarized microglia and the mechanisms that regulate polarization are largely unknown. In this study, we characterized lipopolysaccharide‐treated M1‐like and IL‐4‐treated M2‐like microglia and investigated the mechanisms that regulate phenotypic switching. The addition of M2‐like microglial conditioned medium (CM) to primary neurons resulted in an increase in neurite length when compared with neurons treated with M1‐like microglial CM, possibly because of the enhanced secretion of neurotrophic factors by M2‐like microglia. M1‐like microglia were morphologically characterized by larger soma, whereas M2‐like microglia were characterized by long processes. M2‐like microglia exhibited greater phagocytic capacity than M1‐like microglia. These features switched in response to polarization cues. We found that expression of interferon regulatory factor 7 (IRF7) increased during the M2‐like to M1‐like switch in microglia in vitro and in vivo. Knockdown of IRF7 using siRNA suppressed the expression of M1 marker mRNA and reduced phosphorylation of STAT1. Our findings suggest that IRF7 signaling may play an important role in microglial polarization switching. GLIA 2015;63:595–610