A successful pregnancy requires that the maternal immune system is instructed to a state of tolerance to avoid rejection of the semiallogeneic fetal–placental unit. Although increasing evidence supports that decidual (uterine) macrophages and regulatory T cells (Tregs) are key regulators of fetal tolerance, it is not known how these tolerogenic leukocytes are induced. In this article, we show that the human fetal placenta itself, mainly through trophoblast cells, is able to induce homeostatic M2 macrophages and Tregs. Placental-derived M-CSF and IL-10 induced macrophages that shared the CD14⁺CD163⁺CD206⁺CD209⁺ phenotype of decidual macrophages and produced IL-10 and CCL18 but not IL-12 or IL-23. Placental tissue also induced the expansion of CD25^highCD127^lowFoxp3⁺ Tregs in parallel with increased IL-10 production, whereas production of IFN-γ (Th1), IL-13 (Th2), and IL-17 (Th17) was not induced. Tregs expressed the suppressive markers CTLA-4 and CD39, were functionally suppressive, and were induced, in part, by IL-10, TGF-β, and TRAIL. Placental-derived factors also limited excessive Th cell activation, as shown by decreased HLA-DR expression and reduced secretion of Th1-, Th2-, and Th17-associated cytokines. Thus, our data indicate that the fetal placenta has a central role in promoting the homeostatic environment necessary for successful pregnancy. These findings have implications for immune-mediated pregnancy complications, as well as for our general understanding of tissue-induced tolerance.