Mammary gland regression following weaning (involution) is associated with extensive cell death and the acquisition of an inflammatory signature. Characterizing the interplay between mammary epithelial cells, the re‐emerging stroma and immune cells has implications for the understanding of the pathogenesis of pregnancy‐associated breast cancer. Stat3 has a role in orchestrating cell death and involution, and we sought to determine whether expression of Stat3 by the mammary epithelium also influences the innate immune environment and inflammatory cell influx in the gland. We examined mice in which Stat3 is conditionally deleted only in the mammary epithelium. Distinct sets of genes associated with the acute phase response and innate immunity are markedly up‐regulated during first phase involution in a Stat3‐dependent manner. During second phase involution, chitinase 3‐like 1, which has been associated with wound healing and chronic inflammatory conditions, is dramatically up‐regulated by Stat3. Also at this time, the number of mammary macrophages and mast cells increases per unit area, and this increase is impaired in the absence of epithelial Stat3. Furthermore, expression of arginase‐1 and Ym1, markers of alternatively activated macrophages, is significantly decreased in the absence of Stat3, whilst iNOS, a marker associated with classically activated macrophages, shows significantly increased expression in the Stat3‐deleted glands. Thus, Stat3 is a key transcriptional regulator of genes associated with innate immunity and wound healing and influences mammary macrophage and mast cell numbers. The presence of epithelial Stat3 appears to polarize the macrophages and epithelial cells towards an alternatively activated phenotype, since in the absence of Stat3, the gland retains a phenotype associated with classically activated macrophages. These findings have relevance to the study of pregnancy‐associated breast cancer and the role of Stat3 signalling in recruitment of alternatively activated tumour‐associated macrophages in breast cancer. Copyright © 2012 Pathological Society of Great Britain and Ireland. Published by John Wiley & Sons, Ltd.