Neonatal sepsis is accompanied by impaired apoptotic depletion of monocytes and macrophages (MΦ), aberrant cytokine production, impaired cell metabolism, and sustained inflammation. Macrophage-colony stimulating factor (M-CSF) triggers the differentiation from monocytes into MΦ (MΦ-0). Interleukin-10 (IL10) and Interferon-gamma (IFNy) further differentiate MΦ subpopulations, the anti-inflammatory MΦ-IL10 and the pro-inflammatory MΦ-IFNy subtype. We previously have shown significant differences between adult (PBMΦ) and cord blood (CBMΦ) in the metabolism of all subtypes. To test the hypothesis whether the competence to differentiate monocytes into MΦ-0 and to polarise into MΦ-IFNy and MΦ-IL10 was diminished in CBMΦ as compared to PBMΦ, we polarised monocytes by cultivation with M-CSF for 72 h, followed by stimulation with IFNy or IL10, for 48 h. After flow cytometry based immunotyping, we tested four functions: Phagocytosis of GFP-E. coli, uptake of erythrocytes, T-cell proliferation, induction of regulatory T-cells as well as phosphorylation analysis of AKT and STAT1/STAT3. Phosphorylation of STAT-1 and STAT-3, obligatory to differentiate into MΦ-IFNγ, MΦ-0 and MΦ-IL10, was found to be aberrant in CBMΦ. Whereas infected MΦ-0 showed identical phagocytic indices and intracellular degradation, TLR4-expression, NFkB up-regulation, IL10-, IL6-, and TNFα production of CBMΦ-0 were reduced. In addition, the capacity to bind aged erythrocytes and the consecutive IL10 production was lower in CBMΦ-IL10. Polarised PBMΦ-IFNy and PBMΦ-IL10 expressed higher levels of co-stimulatory receptors (CD80, CD86), had a higher capacity to stimulate T-cells and induced higher amounts of regulatory T-cells (all p < 0.05 vs. corresponding CBMΦ). Hypoxia-inducible-factor-1α (HIF-1α) was stronger expressed in CBMΦ-IFNy and upregulated in infected CBMΦ-0, whereas heme-oxygenase 1 (HO-1) expression was similar to adult PBMΦ. Neonatal MΦ-0, MΦ-IFNy and MΦ-IL10 polarisation is impaired with respect to phenotype and functions tested which may contribute to sustained inflammation in neonatal sepsis.