During aging, microglia - the resident macrophages of the brain - exhibit altered phenotypes and contribute to age-related neuroinflammation. While numerous hallmarks of age-related microglia have been elucidated, the progression from homeostasis to dysfunction during the aging process remains unresolved. To bridge this gap in knowledge, we undertook complementary cellular and molecular analyses of microglia in the mouse hippocampus across the adult lifespan and in the experimental aging model of heterochronic parabiosis. Single-cell RNA-Seq and pseudotime analysis revealed age-related transcriptional heterogeneity in hippocampal microglia and identified intermediate states of microglial aging that also emerge following heterochronic parabiosis. We tested the functionality of intermediate stress response states via TGFβ1 and translational states using pharmacological approaches in vitro to reveal their modulation of the progression to an activated state. Furthermore, we utilized single-cell RNA-Seq in conjunction with in vivo adult microglia-specific Tgfb1 conditional genetic knockout mouse models to demonstrate that microglia advancement through intermediate aging states drives transcriptional inflammatory activation and hippocampal-dependent cognitive decline.