Regulatory T cells (T reg cells) are characterized by the expression of the forkhead lineage-specific transcription factor Foxp3, and their main function is to suppress T cells. While evaluating T reg cells, we identified a population of Foxp3-positive cells that were CD11b(+)F4/80(+)CD68(+), indicating macrophage origin. These cells were observed in spleen, lymph nodes, bone marrow, thymus, liver, and other tissues of naive animals. To characterize this subpopulation of macrophages, we devised a strategy to purify CD11b(+)F4/80(+)Foxp3(+) macrophages using Foxp3-GFP mice. Analysis of CD11b(+)F4/80(+)Foxp3(+) macrophage function indicated that these cells inhibited the proliferation of T cells, whereas Foxp3(-) macrophages did not. Suppression of T cell proliferation was mediated through soluble factors. Foxp3(-) macrophages acquired Foxp3 expression after activation, which conferred inhibitory properties that were indistinguishable from natural Foxp3(+) macrophages. The cytokine and transcriptional profiles of Foxp3(+) macrophages were distinct from those of Foxp3(-) macrophages, indicating that these cells have different biological functions. Functional in vivo analyses indicated that CD11b(+)F4/80(+)Foxp3(+) macrophages are important in tumor promotion and the induction of T reg cell conversion. For the first time, these studies demonstrate the existence of a distinct subpopulation of naturally occurring macrophage regulatory cells in which expression of Foxp3 correlates with suppressive function.