Although peroxisome proliferator-activated receptor γ (PPARγ) has anti-inflammatory actions in macrophages, which macrophage populations express PPARγ in vivo and how it regulates tissue homeostasis in the steady state and during inflammation remains unclear. We now show that lung and spleen macrophages selectively expressed PPARγ among resting tissue macrophages. In addition, Ly-6C(hi) monocytes recruited to an inflammatory site induced PPARγ as they differentiated to macrophages. When PPARγ was absent in Ly-6C(hi)-derived inflammatory macrophages, initiation of the inflammatory response was unaffected, but full resolution of inflammation failed, leading to chronic leukocyte recruitment. Conversely, PPARγ activation favored resolution of inflammation in a macrophage PPARγ-dependent manner. In the steady state, PPARγ deficiency in red pulp macrophages did not induce overt inflammation in the spleen. By contrast, PPARγ deletion in lung macrophages induced mild pulmonary inflammation at the steady state and surprisingly precipitated mortality upon infection with Streptococcus pneumoniae. This accelerated mortality was associated with impaired bacterial clearance and inability to sustain macrophages locally. Overall, we uncovered critical roles for macrophage PPARγ in promoting resolution of inflammation and maintaining functionality in lung macrophages where it plays a pivotal role in supporting pulmonary host defense. In addition, this work identifies specific macrophage populations as potential targets for the anti-inflammatory actions of PPARγ agonists.