Peripheral blood CD14(+)CD16(++) monocytes (Mo) are a rare Mo subpopulation known to undergo expansion in various diseases. We show here that IL-10 in the presence of M-CSF and IL-4 triggers the generation of CD14(+)CD16(++) cells from highly purified human cord blood (CB) and adult blood Mo. CB Mo were more sensitive to this cytokine combination than adult Mo. IL-10-induced CD14(+)CD16(++) cells that expressed dendritic cell markers: CD80, CD86, HLA-DR, and CD83 and initiated significantly decreased allogeneic mixed lymphocyte reactions (MLRs). Blockage of CD86, but not CD80, further down-modulated MLRs induced by CD14(+)CD16(++)cells. CD14(+)CD16(++) cells had similar features to CD14(+)CD16(++) Mo in that they expressed increased level of CCR5, efficiently produced TNF-alpha, and displayed higher MLR than CD14(+)CD16(-) Mo. Together, these results demonstrate that M-CSF, IL-4, and IL-10 drive Mo into CD14(+)CD16(++) cells similar to those identified in vivo, and CB Mo, due to their increased responsiveness, may be a useful starting cell source to study differentiation of CD14(+)CD16(++) cells.