Abstract Toll-like receptor (TLR) 7 activity is associated with myeloid expansion in the autoimmune disease Systemic Lupus Erythematosus (SLE), yet how this contributes to severe anemia, often seen in SLE complication, is unclear. Transcriptional and functional assays indicate that TLR7 signaling in the common myeloid progenitor (CMP) preferentially skews lineage choice towards a hemophagocytic macrophage. Transgenic mice that overexpress Tlr7 and develop SLE-like disease exhibited increased hemophagocytic macrophages and progressively developed anemia. Interestingly, in these mice, we observed not only conventional hemophagocytic macrophage populations known as red pulp macrophages (RPM), but also an inflammation-induced hemophagocytic macrophage population (HPM). Unlike RPM that are primarily yolk sac-derived and require the transcription factor Spi-C for their development, we have found that HPM are monocyte-derived and do not require Spi-C. Additionally, TLR7 drives an expansion of hemophagocytic CD11bhi bone marrow macrophages (BMM) that are not found in the absence of TLR7 signaling. Although it has been shown that pathological conditions including excess heme overload can drive monocytes to differentiate to hemophagocytic macrophages, this is the first account of inflammation driving this process. These findings uncover a novel mechanism by which TLR7 signaling participates in hemophagocytic macrophage differentiation from monocytes and may account for one of the mechanisms driving anemia during chronic inflammation and chronic autoimmune diseases such as SLE.