Intravenous immunoglobulin (IVIg) is used to treat immune‐mediated diseases but its mechanism of action is poorly understood. We have reported that co‐treatment with IVIg and lipopolysaccharide activates macrophages to produce large amounts of anti‐inflammatory IL‐10 in vitro. Thus, we asked whether IVIg‐treated macrophages or IVIg could reduce intestinal inflammation in mice during dextran sulfate sodium (DSS)‐induced colitis by inducing macrophage IL‐10 production in vivo. Adoptive transfer of IVIg‐treated macrophages reduces intestinal inflammation in mice and collagen accumulation post‐DSS. IVIg treatment also reduces DSS‐induced intestinal inflammation and its activity is dependent on the Fc portion of the antibody. Ex vivo, IVIg induces IL‐10 production and reduces IL‐12/23p40 and IL‐1β production in colon explant cultures. Co‐staining tissues for mRNA, we demonstrate that macrophages are the source of IL‐10 in IVIg‐treated mice; and using IL‐10‐GFP reporter mice, we demonstrate that IVIg induces IL‐10 production by intestinal macrophages. Finally, IVIg‐mediated protection is lost in mice deficient in macrophage IL‐10 production (LysMcre+/−IL‐10fl/fl mice). Together, our data demonstrate a novel, in vivo mechanism of action for IVIg. IVIg‐treated macrophages or IVIg could be used to treat people with intestinal inflammation and may be particularly useful for people with inflammatory bowel disease, who are refractory to therapy.