Blockade of B7/CD28 costimulation allows human haploidentical bone marrow transplantation without graft-versus-host disease. This study shows that blockade of B7/CD28 in anergizing mixed lymphocyte reaction (MLR) cultures of peripheral blood mononuclear cells results in the generation of alternatively activated macrophages (AAMΦ). In contrast, priming MLR cultures result in generation of classically activated macrophages (CAMΦ). AAMΦ had enhanced expression of CD14, major histocompatibility complex class II, and CD23; produced alternative macrophage activation-associated CC-chemokine 1 (AMAC-1) chemokine; and displayed increased phagocytotic activity but decreased ability for antigen presentation. Suppression subtractive hybridization revealed that although AAMΦ had undergone terminal maturation and differentiation, they entered a distinct gene expression program as compared with CAMΦ and selectively expressed β2-microglobulin, lysozyme, ferritin heavy and light chain, and the scavenger receptors macrophage mannose receptor and sortilin. Anergic T cells isolated from cultures that led to the development of AAMΦ produced low amounts of interleukin-2 (IL-2), IL-4, and interferon-γ, but high amounts of IL-10. Addition of anti–IL-10 neutralizing monoclonal antibody in anergizing cultures reversed the functional characteristics of AAMΦ, indicating that at least one mechanism involved in the generation of AAMΦ was mediated by IL-10. Importantly, when added in MLR cultures, AAMΦ suppressed T-cell responses. Therefore, besides direct inhibition of T-cell costimulation, blockade of B7/CD28 may facilitate induction of T-cell unresponsiveness by generating AAMΦ. Because in healthy individuals, AAMΦ are found in the placenta and lung, where they protect from unwanted immune reactivity, the results suggest that AAMΦ may play a critical role in the induction of transplantation tolerance.