Bacterial Lipopolysaccharide (LPS) is a strong inducer of inflammation and does so by inducing polarization of macrophages to the classic inflammatory M1 population. Given the role of Btk as a critical signal transducer downstream of TLR4, we investigated its role in M1/M2 induction. In Btk deficient (Btk^−\−) mice we observed markedly reduced recruitment of M1 macrophages following intraperitoneal administration of LPS. Ex vivo analysis demonstrated an impaired ability of Btk^−/− macrophages to polarize into M1 macrophages, instead showing enhanced induction of immunosuppressive M2-associated markers in response to M1 polarizing stimuli, a finding accompanied by reduced phosphorylation of STAT1 and enhanced STAT6 phosphorylation. In addition to STAT activation, M1 and M2 polarizing signals modulate the expression of inflammatory genes via differential activation of transcription factors and regulatory proteins, including NF-κB and SHIP1. In keeping with a critical role for Btk in macrophage polarization, we observed reduced levels of NF-κB p65 and Akt phosphorylation, as well as reduced induction of the M1 associated marker iNOS in Btk^−/− macrophages in response to M1 polarizing stimuli. Additionally enhanced expression of SHIP1, a key negative regulator of macrophage polarisation, was observed in Btk^−/− macrophages in response to M2 polarizing stimuli. Employing classic models of allergic M2 inflammation, treatment of Btk^−/− mice with either Schistosoma mansoni eggs or chitin resulted in increased recruitment of M2 macrophages and induction of M2-associated genes. This demonstrates an enhanced M2 skew in the absence of Btk, thus promoting the development of allergic inflammation.