Interferon gamma (IFN-γ) and leukemia inhibitory factor (LIF) are key gestational factors that may differentially affect leukocyte function during gestation. Because IFN-γ induces a pro-inflammatory phenotype in macrophages and because trophoblast cells are principal targets of LIF in the placenta, we investigated whether and how soluble factors from trophoblast cells regulate the effects of IFN-γ on macrophage activation. IFN-γ reduces macrophage motility, but enhances Stat1 activation, pro-inflammatory gene expression and cytotoxic functions. Soluble factors from villous cytotrophoblasts (vCT+LIF cells) and BeWo cells (BW/ST+LIF cells) that were differentiated in the presence of LIF inhibit macrophage Stat1 activation but inversely sustain Stat3 activation in response to IFN-γ. vCT+LIF cells produce soluble factors that induce Stat3 activation; this effect is partially abrogated in the presence of neutralizing anti-interleukin 10 (IL-10) antibodies. Moreover, soluble factors from BW/ST+LIF cells reduce cell proliferation but enhance the migratory responses of monocytes. In addition, these factors reverse the inhibitory effect of IFN-γ on monocyte/macrophage motility. BW/ST+LIF cells also generate IFN-γ-activated macrophages with enhanced IL-10 expression, but reduced tumor-necrosis factor alpha (TNF-α), CD14 and CD40 expression as well as impaired cytotoxic function. Additional assays performed in the presence of neutralizing anti-IL-10 antibodies and exogenous IL-10 demonstrate that reduced macrophage cytotoxicity and proliferation, but increased cell motility result from the ability of trophoblast IL-10 to sustain Stat3 activation and suppress IFN-γ-induced Stat1 activation. These in vitro studies are the first to describe the regulatory role of the LIF-trophoblast-IL-10 axis in the process of macrophage activation in response to pro-inflammatory cytokines.