Within the CNS, microglia execute various functions associated with brain development, maintenance of homeostasis and elimination of pathogens and protein aggregates. This wide range of activities is closely associated with a plethora of cellular states, which may reciprocally influence or be influenced by their functional dynamics. Advancements in single-cell RNA sequencing have enabled a nuanced exploration of the intricate diversity of microglia, both in health and disease. Here, we review our current understanding of microglial transcriptional heterogeneity. We provide an overview of mouse and human microglial diversity encompassing aspects of development, neurodegeneration, sex and CNS regions. We offer an insight into state-of-the-art technologies and model systems that are poised to improve our understanding of microglial cell states and functions. We also provide suggestions and a tool to annotate microglial cell states on the basis of gene expression.