Microglia and other tissue-resident macrophages within the central nervous system (CNS) have essential roles in neural development, inflammation and homeostasis. However, the molecular pathways underlying their development and function remain poorly understood. Here we report that mice deficient in NRROS, a myeloid-expressed transmembrane protein in the endoplasmic reticulum, develop spontaneous neurological disorders. NRROS-deficient (Nrros-/-) mice show defects in motor functions and die before 6 months of age. Nrros-/- mice display astrogliosis and lack normal CD11bhiCD45lo microglia, but they show no detectable demyelination or neuronal loss. Instead, perivascular macrophage-like myeloid cells populate the Nrros-/- CNS. Cx3cr1-driven deletion of Nrros shows its crucial role in microglial establishment during early embryonic stages. NRROS is required for normal expression of Sall1 and other microglial genes that are important for microglial development and function. Our study reveals a NRROS-mediated pathway that controls CNS-resident macrophage development and affects neurological function.