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Background Apolipoprotein (apo) E is best known for its ability to lower plasma cholesterol and protect against atherosclerosis. Although the liver is the major source of plasma apoE, extra-hepatic sources of apoE, including from macrophages, account for up to 10% of plasma apoE levels. This study examined the contribution of macrophage-derived apoE expression levels in diet-induced hyperlipidemia and atherosclerosis. Methodology/Principal Findings Hypomorphic apoE (Apoe h/h) mice expressing wildtype mouse apoE at ∼2–5% of physiological levels in all tissues were derived by gene targeting in embryonic stem cells. Cre-mediated gene repair of the Apoe h/h allele in Apoe h/hLysM-Cre mice raised apoE expression levels by 26 fold in freshly isolated peritoneal macrophages, restoring it to 37% of levels seen in wildtype mice. Chow-fed Apoe h/hLysM-Cre and Apoe h/h mice displayed similar plasma apoE and cholesterol levels (55.53±2.90 mg/dl versus 62.70±2.77 mg/dl, n = 12). When fed a high-cholesterol diet (HCD) for 16 weeks, Apoe h/hLysM-Cre mice displayed a 3-fold increase in plasma apoE and a concomitant 32% decrease in plasma cholesterol when compared to Apoe h/h mice (602.20±22.30 mg/dl versus 888.80±24.99 mg/dl, n = 7). On HCD, Apoe h/hLysM-Cre mice showed increased apoE immunoreactivity in lesional macrophages and liver-associated Kupffer cells but not hepatocytes. In addition, Apoe h/hLysM-Cre mice developed 35% less atherosclerotic lesions in the aortic root than Apoe h/h mice (167×103±16×103 µm2 versus 259×103±56×103 µm2, n = 7). This difference in atherosclerosis lesions size was proportional to the observed reduction in plasma cholesterol. Conclusions/Significance Macrophage-derived apoE raises plasma apoE levels in response to diet-induced hyperlipidemia and by such reduces atherosclerosis proportionally to the extent to which it lowers plasma cholesterol levels.