Influenza A virus (IAV) is an airborne pathogen that causes significant morbidity and mortality each year. Macrophages (Mϕ) are the first immune population to encounter IAV virions in the lungs and are required to control infection. In the present study, we explored the mechanism by which cytokine signaling regulates the phenotype and function of Mϕ via epigenetic modification of chromatin. We have found that type I interferon (IFN-I) potently upregulates the lysine methyltransferase Setdb2 in murine and human Mϕ, and in turn Setdb2 regulates Mϕ-mediated immunity in response to IAV. The induction of Setdb2 by IFN-I was significantly impaired upon inhibition of the JAK-STAT signaling cascade, and chromatin immunoprecipitation revealed that both STAT1 and interferon regulatory factor 7 bind upstream of the transcription start site to induce expression. The generation of Setdb2^LacZ reporter mice revealed that IAV infection results in systemic upregulation of Setdb2 in myeloid cells. In the lungs, alveolar Mϕ expressed the highest level of Setdb2, with greater than 70% lacZ positive on day 4 post-infection. Silencing Setdb2 activity in Mϕ in vivo enhanced survival in lethal IAV infection. Enhanced host protection correlated with an amplified antiviral response and less obstruction to the airways. By tri-methylating H3K9, Setdb2 silenced the transcription of Mx1 and Isg15, antiviral effectors that inhibit IAV replication. Accordingly, a reduced viral load in knockout mice on day 8 post-infection was linked to elevated Isg15 and Mx1 transcript in the lungs. In addition, Setdb2 suppressed the expression of a large number of other genes with proinflammatory or immunomodulatory function. This included Ccl2, a chemokine that signals through CCR2 to regulate monocyte recruitment to infectious sites. Consistently, knockout mice produced more CCL2 upon IAV infection and this correlated with a 2-fold increase in the number of inflammatory monocytes and alveolar Mϕ in the lungs. Finally, Setdb2 expression by Mϕ suppressed IL-2, IL-10, and IFN-γ production by CD4⁺ T cells in vitro, as well as proliferation in IAV-infected lungs. Collectively, these findings identify Setdb2 as a novel regulator of the immune system in acute respiratory viral infection.