Macrophages are chronically exposed to IL-10 in a variety of physiological and pathological settings. Macrophage responses to short-term stimulation with IL-10 have been extensively studied, but the effects of chronic exposure to IL-10 on macrophage function are not known. Herein we used transcriptional profiling and functional studies to characterize the phenotype of macrophages after long-term culture with IL-10. Classical activation of macrophages by LPS and IFNgamma was suppressed by IL-10. In contrast, IL-10 activated expression of genes that suggested acquisition of functions important for cell trafficking, tissue remodeling, recognition of microbial pathogens and responsiveness to the T cell-derived cytokines IL-2 and IL-21. These results demonstrate that IL-10 induces a differentiation program in macrophages and characterize a novel alternatively activated macrophage phenotype.