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 (AAMphi). In contrast, priming MLR cultures result in generation of classically activated macrophages (CAMphi). AAMphi 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 AAMphi had undergone terminal maturation and differentiation, they entered a distinct gene expression program as compared with CAMphi and selectively expressed beta2-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 AAMphi produced low amounts of interleukin-2 (IL-2), IL-4, and interferon-gamma, but high amounts of IL-10. Addition of anti-IL-10 neutralizing monoclonal antibody in anergizing cultures reversed the functional characteristics of AAMphi, indicating that at least one mechanism involved in the generation of AAMphi was mediated by IL-10. Importantly, when added in MLR cultures, AAMphi 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 AAMphi. Because in healthy individuals, AAMphi are found in the placenta and lung, where they protect from unwanted immune reactivity, the results suggest that AAMphi may play a critical role in the induction of transplantation tolerance.