Although activated inflammatory monocytes (IMCs) and inflammatory dendritic cells (IDCs) are potent T cell suppressors, nonactivated IMCs and IDCs promote T cell activation and Th1/Th17 cell differentiation. In this study, we investigated how to reduce the proinflammatory properties of IMCs and IDCs and further convert them into immune regulatory dendritic cells (DCs). We found that IL-4 and retinoic acid (RA) cotreatment of GM-CSF-differentiated IDCs synergistically induced the expression of aldehyde dehydrogenase family 1, subfamily A2, a rate-limiting enzyme for RA synthesis in DCs. IL-4 plus RA-treated IDCs upregulated CD103 expression and markedly reduced the production of proinflammatory cytokines upon activation. IL-4 plus RA-treated IDCs strongly induced CD4⁺Foxp3⁺ regulatory T cell differentiation and suppressed Th1 and Th17 differentiation. Mechanistically, the transcription factors Stat6 and RA receptor β play important roles in aldehyde dehydrogenase family 1, subfamily A2, induction. In addition, IL-4 and RA signaling pathways interact closely to enhance the regulatory function of treated DCs. Adoptive transfer of IL-4 plus RA-treated DCs significantly increased regulatory T cell frequency in vivo. Direct treatment with IL-4 and RA also markedly suppressed actively induced experimental autoimmune encephalomyelitis. Our data demonstrate the synergistic effect of IL-4 and RA in inducing a regulatory phenotype in IDCs, providing a potential treatment strategy for autoimmune diseases.