Alternative macrophage activation is associated with exacerbated disease in murine models of pulmonary cryptococcosis. The present study evaluated the efficacy of interferon-γ transgene expression by Cryptococcus neoformans strain H99γ in abrogating alternative macrophage activation in infected mice. Macrophage recruitment into the lungs of mice after infection with C. neoformans strain H99γ was comparable with that observed in mice challenged with wild-type C. neoformans. However, pulmonary infection in mice with C. neoformans strain H99γ was associated with reduced pulmonary fungal burden, increased pulmonary Th1-type and interleukin-17 cytokine production, and classical macrophage activation as evidenced by increased inducible nitric oxide synthase expression, histological evidence of enhanced macrophage fungicidal activity, and resolution of inflammation. In contrast, progressive pulmonary infection, enhanced Th2-type cytokine production, and the induction of alternatively activated macrophages expressing arginase-1, found in inflammatory zone 1, Ym1, and macrophage mannose receptor were observed in the lungs of mice infected with wild-type C. neoformans. These alternatively activated macrophages were also shown to harbor highly encapsulated, replicating cryptococci. Our results demonstrate that pulmonary infection with C. neoformans strain H99γ results in the induction of classically activated macrophages and promotes fungal clearance. These studies indicate that phenotype, as opposed to quantity, of infiltrating macrophages correlates with protection against pulmonary C. neoformans infection.