In the lungs, phenotypically different alveolar macrophages (AMs) co-exist with interstitial monocyte-derived macrophages (Mo-Macs) to regulate lung homeostasis. We have shown that airspace-recruited Mo-Macs resolve inflammation, restoring lung-fluid homeostasis. Analyzing publicly available datasets (Immgen Consortium), we found that compared to Mo-Macs, AMs are also enriched with pathways regulating mitochondria function, but their significance remain elusive. During development, AMs are generated by differentiation of lung-recruited fetal liver monocytes by granulocyte macrophage-colony stimulating factor (GM-CSF). In contrast, Mo-Macs require macrophage colony-stimulating factor (M-CSF) to differentiate from monocytes. Here, we mimic the developmental program of AM versus Mo-Macs by differentiating bone marrow monocytes towards AM-like cells (G-BMDM) or Mo-Mac-like cells (M-BMDM) to understand the role of mitochondrial activity in regulating macrophage functions. We confirmed that G-BMDMs highly express canonical AM-like genes on the cell surface, such as Itgax, Siglecf, Chil3, Ear2, Egr2, and Car4. M-BMDM mimics Mo-Macs as they show higher C1q, Mmp9, Folr2, and Cx3cr1 expression. G-BMDM and M-BMDM showed similar mitochondrial mass. However, G-BMDM showed higher mitochondrial membrane potential (ΔΨm) than M-BMDM, which was associated with compromised efferocytic capacity. These findings were recapitulated in vivo at homeostasis where ΔΨm was higher in AM than Mo-Macs or monocytes. AM compared to other tissue resident macrophages expresses very low level of Ptgs1 & 2 the rete limiting enzymes for PGE2 production. Prostaglandin E2 (PGE2) is a potent lipid mediator and modulator of immune cell function and activates protein kinase A (PKA) through generating cAMP. We, therefore, assessed if PGE2 was a factor in diversifying ΔΨm between G-BMDM and M-BMDM. Using the COX2 sensor (COXFLuor), we found that M-BMDM generated more PGE2 than G-BMDM. PGE2 reduced ΔΨm in G-BMDM to the level of M-BMDM. However, this response was not seen in G-BMDM upon inhibiting EP2 receptor (TG4-155; 10μm) or PKA (H89; 5μm), indicating PGE2 functioned by ligating its receptor and elevating PKA activity. During infection or injury many cell types upregulate Ptgs2 expression and activity to produce local PGE2. Further studies showed that during endotoxin induced acute lung injury, Mo-Macs have high COX2 activity and are the major source of PGE2 in the alveolar milieu to promote AM proliferation and efferocytic function, and help resolve edema. However, inhibition of PKA (H89; 1mg/Kg, i.t), impaired AM proliferation and efferocytosis, leading to unresolved injury. These findings indicate that the PGE2-PKA axis stabilizes mitochondrial function in Mo-Macs to maintain the AM-proliferative-efferocytotic niche for resolving edema. This study is funded by NIH grant 5R01-HL155941-03 and P01 HL151327-03. This is the full abstract presented at the American Physiology Summit 2024 meeting and is only available in HTML format. There are no additional versions or additional content available for this abstract. Physiology was not involved in the peer review process.