Splenic red pulp macrophages (RPM) degrade senescent erythrocytes and recycle heme-associated iron. The transcription factor SPI-C is selectively expressed by RPM and is required for their development, but the physiologic stimulus inducing Spic is unknown. Here, we report that Spic also regulated the development of F4/80(+)VCAM1(+) bone marrow macrophages (BMM) and that Spic expression in BMM and RPM development was induced by heme, a metabolite of erythrocyte degradation. Pathologic hemolysis induced loss of RPM and BMM due to excess heme but induced Spic in monocytes to generate new RPM and BMM. Spic expression in monocytes was constitutively inhibited by the transcriptional repressor BACH1. Heme induced proteasome-dependent BACH1 degradation and rapid Spic derepression. Furthermore, cysteine-proline dipeptide motifs in BACH1 that mediate heme-dependent degradation were necessary for Spic induction by heme. These findings are the first example of metabolite-driven differentiation of a tissue-resident macrophage subset and provide new insights into iron homeostasis.