Human amniotic mesenchymal cells (hAMTCs) possess interesting immunomodulatory properties, making them attractive candidates for regenerative medicine applications. Recent in vivo reports argue in favour of an important role for macrophages as targets of hAMTC‐mediated suppression of inflammation and the enhancement of tissue repair. However, a comprehensive study of the effects of hAMTCs and their conditioned medium (CM) on human macrophage differentiation and function is unavailable. In the present study we found that hAMTCs and CM induce the differentiation of myeloid cells (U937 and monocytes) towards macrophages. We then investigated their effects on monocytes differentiated toward pro‐inflammatory M1 and anti‐inflammatory M2 macrophages. Monocytes treated under M1 conditions in the presence of hAMTCs or CMs shifted towards M2‐like macrophages, which expressed CD14, CD209, CD23, CD163 and PM‐2 K, possessed higher phagocytic activity and produced higher IL‐10 and lower pro‐inflammatory cytokines. They were also poor T cell stimulators and Th1 inducers, while they were able to increase activated and naïve suppressive Treg subsets. We show that prostaglandins, and not IL‐6, play a role in determining the M2 activation status. Instead, monocytes treated under M2 conditions in the presence of hAMTCs or CM retained M2‐like features, but with an enhanced anti‐inflammatory profile, having a reduced expression of the co‐stimulatory molecule CD80, reduced phagocytosis activity and decreased the secretion of inflammatory chemokines. Importantly, we provide evidence that macrophages re‐educated by CM improve tissue regeneration/repair in wound‐healing models. In conclusion, we identified new cell targets of hAMTCs and their bioactive factors and here provide insight into the beneficial effects observed when these cells are used in therapeutic approaches in vivo. © 2016 The Authors Journal of Tissue Engineering and Regenerative Medicine Published by John Wiley & Sons Ltd.