ABSTRACTCutaneous squamous cell carcinoma (cSCC) is a common type of cutaneous cancer globally. M2 macrophage‐derived exosomes (M2 exosomes) facilitate the development of cancer. Ferroptosis, a newly uncovered form of cell death, is linked to cancer progression. The present research planned to study the function and potential mechanism of M2 exosomes on ferroptosis in cSCC. Patients with cSCC were recruited to gather adjacent noncancerous specimens and cSCC tissues. Mononuclear macrophage (THP‐1) cells were differentiated into M2 macrophages before exosome extraction, and then the exosomes were added into cSCC cells (A431 and SCL‐1). Erastin was applied to induce ferroptosis. Cell viability, mitochondrial superoxide, lipid‐ROS, malondialdehyde (MDA), and iron level were detected to validate ferroptosis in cSCC cells. Proteins and RNAs were tested by applying western blot and RT‐qPCR. The combination between molecules was validated by ChIP and RIP. Six‐transmembrane epithelial antigen of the prostate 3 (STEAP3) was elevated in cSCC specimens, which correlated to reduced ferroptosis. cSCC tissues presented an increase in the number of M2 macrophages. Erastin‐elicited ferroptosis was repressed by M2 macrophages, while exosome inhibitor GW4869 neutralized the outcome of M2 macrophages. Furthermore, M2 exosomes repressed ferroptosis of cSCC cells via circ_0088494, which might be related to the upregulation of STEAP3. M2 exosomes‐derived circ_0088494 promoted histone 3 lysine 4 monomethylation (H3K4me1) modification of STEAP3 by recruiting histone‐lysine N‐methyltransferase 2D (KMT2D). The effect of circ_0088494‐silenced M2 exosomes on ferroptosis was antagonized by STEAP3 overexpression. M2 exosomes‐derived circ_0088494 recruited KMT2D to promote H3K4me1 modification of STEAP3, thereby inhibiting ferroptosis in cSCC. This study might provide a novel target for cSCC treatment.