Recent advances in transplanting hypoimmunogenic pig organs have marked a major step in transplantation medicine. However, despite the heroic number of genomic edits made and intense immunosuppression, these porcine organs still failed within months of transplant into human patients, likely due to the vast number of other interspecies differences. Therefore, interspecies blastocyst complementation is a promising approach to generate human organs from pluripotent stem cells, but xenogeneic donor cell contribution remains low due to poorly understood xenogeneic barriers. In addition to the previously proposed xenogeneic barrier driven by developmental incompatibilities, here we identify an innate immune barrier, termed xenogeneic phagocytosis (xenophagocytosis), mediated by host macrophages. After injecting rat PSCs into mouse blastocysts, we found that donor chimerism sharply declines between embryonic days 9.5 and 11.5, coinciding with the emergence of mouse primitive macrophages. Genetic depletion of host macrophages significantly improved rat donor chimerism in the mouse embryo—achieving up to 77% chimerism in lung and 57% in heart. We identify the mechanism by which host macrophages selectively phagocytose xenogeneic donor cells: xenogeneic cells display elevated phosphatidylserine, an "eat-me" signal recognized by host macrophages through phagocytic receptor Axl. Axl positive macrophages actively recognize and eliminate donor cells through xenophagocytosis. Genetic knockout of Axl from host embryos or overexpression of the "don't eat-me" signal CD47 on donor cells markedly enhanced donor rat chimerism. Xenophagocytosis blockade also enhances chimerism in human to mouse chimeras, demonstrating the generalizability of this strategy. These findings offer mechanistic insights and practical strategies not only for overcoming the xenogeneic barrier to generating human organs in livestock, but also for improving rejection outcomes in xenotransplantation.