Tissue inhibitor of metalloproteinases-3 (TIMP-3) has emerged as a key mediator of inflammation. Recently, we reported that the resolution of inflammation is impaired in Timp3(-/-) mice after bleomycin-induced lung injury. Here, we demonstrate that after LPS instillation (another model of acute lung injury), Timp3(-/-) mice demonstrate enhanced and persistent neutrophilia, increased numbers of infiltrated macrophages, and delayed weight gain, compared with wild-type (WT) mice. Because macrophages possess broad immune functions and can differentiate into cells that either stimulate inflammation (M1 macrophages) or are immunosuppressive (M2 macrophages), we examined whether TIMP-3 influences macrophage polarization. Comparisons of the global gene expression of unstimulated or LPS-stimulated bone marrow-derived macrophages (BMDMs) from WT and Timp3(-/-) mice revealed that Timp3(-/-) BMDMs exhibited an increased expression of genes associated with proinflammatory (M1) macrophages, including Il6, Il12, Nos2, and Ccl2. Microarray analyses also revealed a baseline difference in gene expression between WT and Timp3(-/-) BMDMs, suggesting altered macrophage differentiation. Furthermore, the treatment of Timp3(-/-) BMDMs with recombinant TIMP-3 rescued this altered gene expression. We also examined macrophage function, and found that Timp3(-/-) M1 cells exhibit significantly more neutrophil chemotactic activity and significantly less soluble Fas ligand-induced caspase-3/7 activity, a marker of apoptosis, compared with WT M1 cells. Macrophage differentiation into immunosuppressive M2 cells is mediated by exposure to IL-4/IL-13, and we found that Timp3(-/-) M2 macrophages demonstrated a lower expression of genes associated with an anti-inflammatory phenotype, compared with WT M2 cells. Collectively, these findings indicate that TIMP-3 functions to moderate the differentiation of macrophages into proinflammatory (M1) cells.