Peyer's patches (PPs) are primary inductive sites of mucosal immunity. Defining PP mononuclear phagocyte system (MPS) is thus crucial to understand the initiation of mucosal immune response. We provide a comprehensive analysis of the phenotype, distribution, ontogeny, lifespan, function, and transcriptional profile of PP MPS. We show that monocytes give rise to macrophages and to lysozyme-expressing dendritic cells (LysoDCs), which are both involved in particulate antigen uptake, display strong innate antiviral and antibacterial gene signatures, and, upon TLR7 stimulation, secrete IL-6 and TNF, but neither IL-10 nor IFN gamma. However, unlike macrophages, LysoDCs display a rapid renewal rate, strongly express genes of the MHCII presentation pathway, and prime naive helper T cells for IFNg production. Our results show that monocytes differentiate locally into LysoDCs and macrophages, which display distinct features from their adjacent villus counterparts.