Type 2 cytokines regulate fibrotic liver pathology in mice infected with Schistosoma mansoni. Switching the immune response to a type 1-dominant reaction has proven highly effective at reducing the pathologic response. Activation of NOS-2 is critical, because type 1-deviated/NO synthase 2 (NOS-2)-deficient mice completely fail to control their response. Here, we demonstrate the differential regulation of NOS-2 and arginase type 1 (Arg-1) by type 1/type 2 cytokines in vivo and for the first time show a critical role for arginase in the pathogenesis of schistosomiasis. Using cytokine-deficient mice and two granuloma models, we show that induction of Arg-1 is type 2 cytokine dependent. Schistosome eggs induce Arg-1, while Mycobacterium avium-infected mice develop a dominant NOS-2 response. IFN-γ suppresses Arg-1 activity, because type 1 polarized IL-4/IL-10-deficient, IL-4/IL-13-deficient, and egg/IL-12-sensitized animals fail to up-regulate Arg-1 following egg exposure. Notably, granuloma size decreases in these type-1-deviated/Arg-1-unresponsive mice, suggesting an important regulatory role for Arg-1 in schistosome egg-induced pathology. To test this hypothesis, we administered difluoromethylornithine to block ornithine-aminodecarboxylase, which uses the product of arginine metabolism, l-ornithine, to generate polyamines. Strikingly, granuloma size and hepatic fibrosis increased in the ornithine-aminodecarboxylase-inhibited mice. Furthermore, we show that type 2 cytokine-stimulated macrophages produce proline under strict arginase control. Together, these data reveal an important regulatory role for the arginase biosynthetic pathway in the regulation of inflammation and demonstrate that differential activation of Arg-1/NOS-2 is a critical determinant in the pathogenesis of granuloma formation.