The mechanisms that determine full recovery versus subsequent progressive CKD after AKI are largely unknown. Because macrophages regulate inflammation as well as epithelial recovery, we investigated whether macrophage activation influences AKI outcomes. IL-1 receptor-associated kinase-M (IRAK-M) is a macrophage-specific inhibitor of Toll-like receptor (TLR) and IL-1 receptor signaling that prevents polarization toward a proinflammatory phenotype. In postischemic kidneys of wild-type mice, IRAK-M expression increased for 3 weeks after AKI and declined thereafter. However, genetic depletion of IRAK-M did not affect immunopathology and renal dysfunction during early postischemic AKI. Regarding long-term outcomes, wild-type kidneys regenerated completely within 5 weeks after AKI. In contrast, IRAK-M(-/-) kidneys progressively lost up to two-thirds of their original mass due to tubule loss, leaving atubular glomeruli and interstitial scarring. Moreover, M1 macrophages accumulated in the renal interstitial compartment, coincident with increased expression of proinflammatory cytokines and chemokines. Injection of bacterial CpG DNA induced the same effects in wild-type mice, and TNF-α blockade with etanercept partially prevented renal atrophy in IRAK-M(-/-) mice. These results suggest that IRAK-M induction during the healing phase of AKI supports the resolution of M1 macrophage- and TNF-α-dependent renal inflammation, allowing structural regeneration and functional recovery of the injured kidney. Conversely, IRAK-M loss-of-function mutations or transient exposure to bacterial DNA may drive persistent inflammatory mononuclear phagocyte infiltrates, which impair kidney regeneration and promote CKD. Overall, these results support a novel role for IRAK-M in the regulation of wound healing and tissue regeneration.