Macrophages are essential in atherosclerosis progression, but regulation of the M1 versus M2 phenotype and their role in cholesterol deposition are unclear. We demonstrate that endoplasmic reticulum (ER) stress is a key regulator of macrophage differentiation and cholesterol deposition. Macrophages from diabetic patients were classically or alternatively stimulated and then exposed to oxidized LDL. Alternative stimulation into M2 macrophages lead to increased foam cell formation by inducing scavenger receptor CD36 and SR-A1 expression. ER stress induced by alternative stimulation was necessary to generate the M2 phenotype through JNK activation and increased PPARγ expression. The absence of CD36 or SR-A1 signaling independently of modified cholesterol uptake decreased ER stress and prevented the M2 differentiation typically induced by alternative stimulation. Moreover, suppression of ER stress shifted differentiated M2 macrophages toward an M1 phenotype and subsequently suppressed foam cell formation by increasing HDL- and apoA-1-induced cholesterol efflux indicating suppression of macrophage ER stress as a potential therapy for atherosclerosis.