Macrophages respond to bacterial products by releasing a large array of inflammatory mediators. We demonstrate that, in the presence of IgG immune complexes, macrophages produce high levels of IL-10 and virtually no IL-12, when they are exposed to bacterial products. The production of IL-10 by these cells can dampen innate inflammatory responses to microbial products, such as LPS. This alteration in macrophage cytokine production can also influence an adaptive immune response, preferentially inducing Th2-type immunity. Thus, immune complexes change the physiology of activated macrophages, converting them to anti-inflammatory cells that induce Th2-like immune responses. We have termed these cells type II activated macrophages.