Macrophages adopt an alternatively activated phenotype (AAMs) when activated by the interleukin-4receptor(R)α. AAMs can be derived either from proliferation of tissue resident macrophages or recruited inflammatory monocytes, but it is not known whether these different sources generate AAMs that are phenotypically and functionally distinct. By transcriptional profiling analysis, we show here that, although both monocyte and tissue-derived AAMs expressed high levels of Arg1, Chi3l3, and Retnla, only monocyte-derived AAMs up-regulated Raldh2 and PD-L2. Monocyte-derived AAMs were also CX3CR1-green fluorescent protein (GFP)^high and expressed CD206, whereas tissue-derived AAMs were CX3CR1-GFP and CD206 negative. Monocyte-derived AAMs had high levels of aldehyde dehydrogenase activity and promoted the differentiation of FoxP3⁺ cells from naïve CD4⁺ cells via production of retinoic acid. In contrast, tissue-derived AAMs expressed high levels of uncoupling protein 1. Hence monocyte-derived AAM have properties associated with immune regulation, and the different physiological properties associated with AAM function may depend on the distinct lineage of these cells.