Frontotemporal Lobar degeneration (FTLD) is the second most common form of early onset dementia characterized by the progressive atrophy of frontal and temporal lobes, resulting in behavior, cognitive, and language dysfunction. Mutations in the GRN gene, encoding the progranulin (PGRN) protein, have been identified as a causative genetic basis for FTLD. PGRN is a secreted glycoprotein involved in an array of cellular processes including tumorigenesis, wound healing, lysosomal function, and inflammatory responses. PGRN can be cleaved into 7.5 granulin peptides (GRN A, B, C, D, E, F, G, and the paragranulin fragment) which can have independent functions. PGRN functions both in the lysosome by regulating the activities of multiple lysosomal proteins and extracellularly by interacting with another set of proteins to regulate cell survival and signaling. In the brain, PGRN is essential for proper microglia-mediated activities. In this work, we show that the two pools of PGRN, intracellular and extracellular, have unique binding partners necessary for regulating inflammatory processes. Intracellularly, PGRN-derived granulin E binds to CD68, a lysosomal membrane protein involved in microglia activation, and together they reciprocally regulate their protein homeostasis. I provide evidence that CD68 is required for the stability of the GRN E peptide while PGRN is required to prevent alterations in CD68 molecular weight. Furthermore, I show that the extracellular pool of PGRN binds to Gas6, a secreted glycoprotein involved in phagocytosis and inflammation, and regulates Gas6 levels. Altogether, my data reveals novel mechanisms by which PGRN regulates inflammatory responses.