Bile acids are steroid acids found in the bile of mammals. The bile acid conjugate tauroursodeoxycholic acid (TUDCA) is neuroprotective in different animal models of stroke and neurological diseases. We have previously shown that TUDCA has anti‐inflammatory effects on glial cell cultures and in a mouse model of acute neuroinflammation. We show now that microglial cells (central nervous system resident macrophages) express the G protein‐coupled bile acid receptor 1/Takeda G protein‐coupled receptor 5 (GPBAR1/TGR5) in vivo and in vitro. TUDCA binding to GPBAR1/TGR5 caused an increase in intracellular cAMP levels in microglia that induced anti‐inflammatory markers, while reducing pro‐inflammatory ones. This anti‐inflammatory effect of TUDCA was inhibited by small interference RNA for GPBAR1/TGR5 receptor, as well as by treatment with a protein kinase A (PKA) inhibitor. In the mouse model of acute neuroinflammation, treating the animals with TUDCA was clearly anti‐inflammatory. TUDCA biased the microglial phenotype in vivo and in vitro toward the anti‐inflammatory. The bile acid receptor GPBAR1/TGR5 could be a new therapeutic target for pathologies coursing with neuroinflammation and microglia activation, such as traumatic brain injuries, stroke, or neurodegenerative diseases. TUDCA and other GPBAR1/TGR5 agonists need to be further investigated, to determine their potential in attenuating the neuropathologies associated with microglia activation. J. Cell. Physiol. 232: 2231–2245, 2017. © 2016 Wiley Periodicals, Inc. We provide evidence that tauroursodeoxycholic acid (TUDCA) exerts anti‐inflammatory effects through its binding to GPBAR1/TGR5, and the consequent increase in intracellular cAMP levels in microglia. Besides, TUDCA treatment biased microglia towards the anti‐inflammatory phenotype under pro‐inflammatory conditions in vitro and in vivo. TUDCA and other GPBAR1/TGR5 agonists are potential therapeutic targets for the treatment of neuropathologies associated with microglia activation.