In previous studies we found that macrophages (MФs) from SH2-containing inositol-5'-phosphatase (SHIP) deficient mice are M2 polarized while their wild type (WT) counterparts are M1 polarized and that this difference in MФ phenotype can be recapitulated during in vitro derivation from bone marrow if mouse plasma (MP), but not fetal calf serum, is added to standard M-CSF-containing cultures. In the current study we investigated the mechanism by which MP skews SHIP-/- but not +/+ MФs to an M2 phenotype. Our results suggest that SHIP-/- basophils constitutively secrete higher levels of IL-4 than SHIP+/+ basophils and this higher level of IL-4 is sufficient to skew both SHIP+/+ and SHIP-/- MФs to an M2 phenotype, but only when MP is present to increase the sensitivity of the MФs to this level of IL-4. MP increases the IL-4 sensitivity of both SHIP+/+ and -/- MФs not by increasing cell surface IL-4 or CD36 receptor levels, but by triggering the activation of Erk and Akt and the production of ROS, all of which play a critical role in sensitizing MФs to IL-4-induced M2 skewing. Studies to identify the factor(s) in MP responsible for promoting IL-4-induced M2 skewing suggests that all-trans retinoic acid (ATRA), TGFβ and prostaglandin E2 (PGE2) all play a role. Taken together, these results indicate that basophil-secreted IL-4 plays an essential role in M2 skewing and that ATRA, TGFβ and PGE2 within MP collaborate to dramatically promote M2 skewing by acting directly on MФs to increase their sensitivity to IL-4.