Regulation of macrophage activities in response to inflammatory stimuli must be finely tuned to promote an effective immune response while, at the same time, preventing damage to the host. Our lab and others have previously shown that macrophage-stimulating protein (MSP), through activation of its receptor RON, negatively regulates NO production in response to IFN-γ and LPS by inhibiting the expression of inducible NO synthase (iNOS). Furthermore, activated macrophages from mice harboring targeted mutations in RON produce increased levels of NO both in vitro and in vivo, rendering them more susceptible to LPS-induced endotoxic shock. In this study, we demonstrate that stimulation of murine peritoneal macrophages with MSP results in the RON-dependent up-regulation of arginase, an enzyme associated with alternative activation that competes with iNOS for the substrate l-arginine, the products of which are involved in cell proliferation and matrix synthesis. Expression of other genes associated with alternative activation, including scavenger receptor A and IL-1R antagonist, is also up-regulated in MSP-stimulated murine macrophages. Stimulation of cells with IFN-γ and LPS blocks the ability of MSP to induce arginase activity. However, pretreatment of cells with MSP results in the up-regulation of arginase and inhibits their ability to produce NO in response to IFN-γ and LPS, even in the presence of excess substrate, suggesting that the inhibition of NO by MSP occurs primarily through its ability to regulate iNOS expression.