Hematopoietic cell transplantation after myeloablative conditioning has been used to treat various genetic metabolic syndromes but is largely ineffective in diseases affecting the brain presumably due to poor and variable myeloid cell incorporation into the central nervous system. Here, we developed and characterized a near-complete and homogeneous replacement of microglia with bone marrow cells in mice without the need for genetic manipulation of donor or host. The high chimerism resulted from a competitive advantage of scarce donor cells during microglia repopulation rather than enhanced recruitment from the periphery. Hematopoietic stem cells, but not immediate myeloid or monocyte progenitor cells, contained full microglia replacement potency equivalent to whole bone marrow. To explore its therapeutic potential, we applied microglia replacement to a mouse model for Prosaposin deficiency, which is characterized by a progressive neurodegeneration phenotype. We found a reduction of cerebellar neurodegeneration and gliosis in treated brains, improvement of motor and balance impairment, and life span extension even with treatment started in young adulthood. This proof-of-concept study suggests that efficient microglia replacement may have therapeutic efficacy for a variety of neurological diseases.