Microglia impact brain development, homeostasis, and pathology. One important microglial function in Alzheimer's disease (AD) is to contain proteotoxic amyloid-β (Aβ) plaques. Recent studies reported the involvement of autophagy-related (ATG) proteins in this process. Here, we found that microglia-specific deletion of Atg7 in an AD mouse model impaired microglia coverage of Aβ plaques, increasing plaque diffusion and neurotoxicity. Single-cell RNA sequencing, biochemical, and immunofluorescence analyses revealed that Atg7 deficiency reduces unfolded protein response (UPR) while increasing oxidative stress. Cellular assays demonstrated that these changes lead to lipoperoxidation and ferroptosis of microglia. In aged mice without Aβ buildup, UPR reduction and increased oxidative damage induced by Atg7 deletion did not impact microglia numbers. We conclude that reduced UPR and increased oxidative stress in Atg7-deficient microglia lead to ferroptosis when exposed to proteotoxic stress from Aβ plaques. However, these microglia can still manage misfolded protein accumulation and oxidative stress as they age.