Dendritic cells (DCs), monocytes, and/or macrophages initiate host-protective immune responses to intracellular pathogens in part through interleukin-12 (IL-12) production, although the relative contribution of tissue resident versus recruited cells has been unclear. Here, we showed that after intraperitoneal infection with Toxoplasma gondii cysts, resident mononuclear phagocytes are replaced by circulating monocytes that differentiate in situ into inflammatory DCs (moDCs) and F4/80⁺ macrophages. Importantly, NK cell-derived interferon-γ (IFN-γ) was required for both the loss of resident mononuclear phagocytes and the local differentiation of monocytes into macrophages and moDCs. This newly generated moDC population and not the resident DCs (or macrophages) served as the major source of IL-12 at the site of infection. Thus, NK cell-derived IFN-γ is important in both regulating inflammatory cell dynamics and in driving the local differentiation of monocytes into the cells required for initiating the immune response to an important intracellular pathogen.