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The term mono-cyte suggests this population of cells consists of a single homogenous fraction. However, evidence from a number of laboratories indicates that monocytes are composed of several subsets, which differ in phenotype, size, nuclear morphology, granularity and gene profiles. Most importantly, recent data suggest that monocyte subsets are also functionally distinct. Here we summarize the recent advances in our understanding of monocyte subsets and their origins, fates and functions.The recent past has seen major progress in our understanding of myeloid differentiation. Specifically, the published literature now suggests a dichotomy that starts at the stage of a novel clonotypic bone marrow resident precursor, the macrophage dendritic cell progenitor (MDP). Insights into differential origins of macrophages and dendritic cells, linked with functional specifications, are likely to significantly change our current view of the mononuclear phagocyte system.Contemporary studies have demonstrated that two subsets of monocytes reside in the peripheral circulation. These subsets are surprisingly distinct; with regard to their functions and fates, for example, one subset might be dedicated to generate macrophages upon extravasation from the peripheral circulation, whereas, the other subset under inflammatory conditions may differentiate into inflammatory dendritic cells. The tissue response during pathogenesis seems to differentially mobilize these cells, thereby manipulating the local mononuclear phagocyte composition according to acute needs.