Recurrent episodes of inflammation underlie numerous pathologies, notably those of inflammatory bowel diseases. In this study, we describe a population of macrophages in a novel state of activation that mitigates colitis in mice. The cells responsible for this effect, called IFN-gamma-stimulated monocyte-derived cells (IFNgamma-MdC), derive from mouse spleen, blood, and bone marrow monocytes and are distinguished from known macrophage populations by mode of generation, cell surface phenotype, and function. IFNgamma-MdC only arise when macrophages are cultivated in the presence of CD40L-expressing CD4+ T cells, M-CSF, and IFN-gamma. IFNgamma-MdC express markers including F4/80, CD11b/c, CD86, and CD274; they are negative for CD4, CD8, Gr1, CD19, CD80, and CD207. Functionally, IFNgamma-MdC are defined by their capacity to enrich cocultured T cell populations for CD4+CD25+Foxp3+ regulatory cells; this enrichment, constituting up to 60% or more of residual lymphocytes, is attributed to an expansion, but also to a cell contact and caspase-dependent depletion of activated T cells. In mice, IFNgamma-MdC delivered i.v. traffic to gut-associated peripheral lymphoid tissues, including the mesenteric lymph nodes, Peyer's patches, and colonic mucosa, and promote the clinical and histological resolution of chronic colitis. We conclude that IFNgamma-MdC represent macrophages in a novel state of activation, possessing multiple T cell-suppressive effects with therapeutic potential for the treatment of autoimmune inflammation.