In recent years it has become apparent that removal of apoptotic cells (AC) by professional phagocytes alters the macrophage phenotype. This change is characterized by attenuated proinflammatory cytokine expression and NO production, which mechanistically remained unexplained. With the intention to explore molecular mechanisms underlying reduced NO formation, we showed that NO production in IFNgamma-stimulated murine RAW264.7 macrophages exposed to AC but not to either necrotic or viable human Jurkat cells was significantly reduced although iNOS expression remained high compared with controls. Analyzing iNOS activity in the cell extracts by using the radioactive L-arginine/citrulline conversion assay revealed increased ornithine production over citrulline in cells exposed to AC. RT-PCR, Western blot, and luciferase reporter analysis supported the idea of an arginase II increase in response to AC. The involvement of arginase in modulating NO formation in response to AC was substantiated by the arginase inhibitor N(omega)-hydroxy-nor-L-arginine. Moreover, knockdown of arginase II by siRNA allowed recovery of NO production. Experiments with AC-conditioned medium demonstrated that a soluble lipid factor, rather than phagocytosis of AC, modulated NO production in macrophages. We conclude that AC release a lipid factor to modulate NO formation in macrophages via arginase II up-regulation, thereby contributing to innate immune regulation.