Airway tolerance is the usual outcome of inhalation of harmless antigens. Although T cell deletion and anergy are likely components of tolerogenic mechanisms in the lung, increasing evidence indicates that antigen-specific regulatory T cells (inducible T_reg cells [iT_reg cells]) that express Foxp3 are also critical. Several lung antigen-presenting cells have been suggested to contribute to tolerance, including alveolar macrophages (MØs), classical dendritic cells (DCs), and plasmacytoid DCs, but whether these possess the attributes required to directly promote the development of Foxp3⁺ iT_reg cells is unclear. Here, we show that lung-resident tissue MØs coexpress TGF-β and retinal dehydrogenases (RALDH1 and RALDH 2) under steady-state conditions and that their sampling of harmless airborne antigen and presentation to antigen-specific CD4 T cells resulted in the generation of Foxp3⁺ T_reg cells. T_reg cell induction in this model depended on both TGF-β and retinoic acid. Transfer of the antigen-pulsed tissue MØs into the airways correspondingly prevented the development of asthmatic lung inflammation upon subsequent challenge with antigen. Moreover, exposure of lung tissue MØs to allergens suppressed their ability to generate iT_reg cells coincident with blocking airway tolerance. Suppression of T_reg cell generation required proteases and TLR-mediated signals. Therefore, lung-resident tissue MØs have regulatory functions, and strategies to target these cells might hold promise for prevention or treatment of allergic asthma.