Reactive microglia are commonly seen in retinal degenerative diseases, and neurotoxic microglia responses can contribute to photoreceptor cell death. We and others have previously shown that translocator protein (18 kDa) (TSPO) is highly induced in retinal degenerations and that the selective TSPO ligand XBD173 (AC-5216, emapunil) exerts strong anti-inflammatory effects on microglia in vitro and ex vivo. Here, we investigated whether targeting TSPO with XBD173 has immuno-modulatory and neuroprotective functions in two mouse models of acute retinal degeneration using bright white light exposure. BALB/cJ and Cx3cr1(GFP/+) mice received intraperitoneal injections of 10 mg/kg XBD173 or vehicle for five consecutive days, starting 1 day prior to exposure to either 15,000 lux white light for 1 h or 50,000 lux focal light for 10 min, respectively. The effects of XBD173 treatment on microglia and Müller cell reactivity were analyzed by immuno-stainings of retinal sections and flat mounts, fluorescence-activated cell sorting (FACS) analysis, and mRNA expression of microglia markers using quantitative real-time PCR (qRT-PCR). Optical coherence tomography (OCT), terminal deoxynucleotidyl transferase dUTP nick end labeling (TUNEL) stainings, and morphometric analyses were used to quantify the extent of retinal degeneration and photoreceptor apoptosis. Four days after the mice were challenged with bright white light, a large number of amoeboid-shaped alerted microglia appeared in the degenerating outer retina, which was nearly completely prevented by treatment with XBD173. This treatment also down-regulated the expression of TSPO protein in microglia but did not change the TSPO levels in the retinal pigment epithelium (RPE). RT-PCR analysis showed that the microglia/macrophage markers Cd68 and activated microglia/macrophage whey acidic protein (Amwap) as well as the pro-inflammatory genes Ccl2 and Il6 were reduced after XBD173 treatment. Light-induced degeneration of the outer retina was nearly fully blocked by XBD173 treatment. We further confirmed these findings in an independent mouse model of focal light damage. Retinas of animals receiving XBD173 therapy displayed significantly more ramified non-reactive microglia and more viable arrestin-positive cone photoreceptors than vehicle controls. Targeting TSPO with XBD173 effectively counter-regulates microgliosis and ameliorates light-induced retinal damage, highlighting a new pharmacological concept for the treatment of retinal degenerations.