Members of the CCAAT/enhancer-binding protein (C/EBP) family are involved in the regulation of cellular differentiation and function of many tissues. Unlike the other members of the family, C/EBPε expression is restricted to granulocytes, macrophages, and lymphocytes. C/EBPε is highly conserved between human and rodents and is essential for terminal granulopoiesis in both species. To study the role that C/EBPε plays in macrophages, wild-type and C/EBPε–deficient (−/−) murine macrophages obtained from thioglycollate-elicited peritoneal lavages and differentiated bone marrow cells were compared. Although macrophage development occurred in both types of mice, the C/EBPε−/− cells had a lower expression of macrophage markers and a morphologic and ultrastructural appearance of immaturity. Phagocytic function, measured by calculating the percentage of internalized opsonized fluorescein isothiocyanate (FITC)–labeled yeast, was significantly impaired in the C/EBPε−/− macrophages compared with their wild-type counterparts. Furthermore, the differential expression of 26 macrophage-specific genes between wild-type and C/EBP−/− mice was analyzed. A subset of genes involved in differentiation, immune, and inflammatory responses was found down-regulated in the C/EBP−/− macrophages. Taken together, this study implicates theC/EBPε gene as an important transcription factor required for normal function and development of macrophages.