Microglia are phagocytic cells that form the basis of the brain’s immune system. They derive from primitive macrophages that migrate into the brain during embryogenesis, but the genetic control of microglial development remains elusive. Starting with a genetic screen in zebrafish, we show that the noncanonical NOD-like receptor (NLR) nlrc3-like is essential for microglial formation. Although most NLRs trigger inflammatory signaling, nlrc3-like acts cell autonomously in microglia precursor cells to suppress unwarranted inflammation in the absence of overt immune challenge. In nlrc3-like mutants, primitive macrophages initiate a systemic inflammatory response with increased proinflammatory cytokines and actively aggregate instead of migrating into the brain to form microglia. NLRC3-like requires both its pyrin and NACHT domains, and it can bind the inflammasome component apoptosis-associated speck-like protein. Our studies suggest that NLRC3-like may regulate the inflammasome and other inflammatory pathways. Together, these results demonstrate that NLRC3-like prevents inappropriate macrophage activation, thereby allowing normal microglial development.