The endothelial glycocalyx and its regulated shedding are important to vascular health. Endo-β-D-glucuronidase heparanase-1 (HPSE1) is the only enzyme that can shed heparan sulfate. However, the mechanisms are not well understood. We show that HPSE1 activity aggravated Toll-like receptor 4 (TLR4)-mediated response of endothelial cells to LPS. On the contrary, overexpression of its endogenous inhibitor, heparanase-2 (HPSE2) was protective. The microfluidic chip flow model confirmed that HPSE2 prevented heparan sulfate shedding by HPSE1. Furthermore, heparan sulfate did not interfere with cluster of differentiation-14 (CD14)-dependent LPS binding, but instead reduced the presentation of the LPS to TLR4. HPSE2 reduced LPS-mediated TLR4 activation, subsequent cell signalling, and cytokine expression. HPSE2-overexpressing endothelial cells remained protected against LPS-mediated loss of cell-cell contacts. In vivo, expression of HPSE2 in plasma and kidney medullary capillaries was decreased in mouse sepsis model. We next applied purified HPSE2 in mice and observed decreases in TNFα and IL-6 plasma concentrations after intravenous LPS injections. Our data demonstrate the important role of heparan sulfate and the glycocalyx in endothelial cell activation and suggest a protective role of HPSE2 in microvascular inflammation. HPSE2 offers new options for protection against HPSE1-mediated endothelial damage and preventing microvascular disease.