Transplantation of curcumin-activated olfactory ensheathing cells (aOECs) improved functional recovery in spinal cord injury (SCI) rats. Nevertheless, little is known considering the underlying mechanisms. At the present study, we investigated the promotion of regeneration and functional recovery after transplantation of aOECs into rats with SCI and the possible underlying molecular mechanisms. Primary OECs were prepared from the olfactory bulb of rats, followed by treatment with 1µM CCM at 7–10 days of culture, resulting in cell activation. Concomitantly, rat SCI model was developed to evaluate the effects of transplantation of aOECs in vivo. Subsequently, microglia were isolated, stimulated with 100 ng/mL lipopolysaccharide (LPS) for 24 h to polarize to M1 phenotype and treated by aOECs conditional medium (aOECs-CM) and OECs conditional medium (OECs-CM), respectively. Changes in the expression of pro-inflammatory and anti-inflammatory phenotypic markers expression were detected using western blotting and immunofluorescence staining, respectively. Finally, a series of molecular biological experiments including knock-down of triggering receptor expressed on myeloid cells 2 (TREM2) and analysis of the level of apolipoprotein E (APOE) expression were performed to investigate the underlying mechanism of involvement of CCM-activated OECs in modulating microglia polarization, leading to neural regeneration and function recovery. CCM-activated OECs effectively attenuated deleterious inflammation by regulating microglia polarization from the pro-inflammatory (M1) to anti-inflammatory (M2) phenotype in SCI rats and facilitated functional recovery after SCI. In addition, microglial polarization to M2 elicited by aOECs-CM in LPS-induced microglia was effectively reversed when TREM2 expression was downregulated. More importantly, the in vitro findings indicated that aOECs-CM potentiating LPS-induced microglial polarization to M2 was partially mediated by the TREM2/nuclear factor kappa beta (NF-κB) signaling pathway. Besides, the expression of APOE significantly increased in CCM-treated OECs. CCM-activated OECs could alleviate inflammation after SCI by switching microglial polarization from M1 to M2, which was likely mediated by the APOE/TREM2/NF-κB pathway, and thus ameliorated neurological function. Therefore, the present finding is of paramount significance to enrich the understanding of underlying molecular mechanism of aOECs-based therapy and provide a novel therapeutic approach for treatment of SCI.