TNFα-stimulated gene-6 (TSG6), a 30-kDa protein generated by activated macrophages, modulates inflammation; however, its mechanism of action and role in the activation of macrophages are not fully understood. Here we observed markedly augmented LPS-induced inflammatory lung injury and mortality in TSG6 −/− mice compared with WT (TSG6 +/+ ) mice. Treatment of mice with intratracheal instillation of TSG6 prevented LPS-induced lung injury and neutrophil sequestration, and increased survival in mice. We found that TSG6 inhibited the association of TLR4 with MyD88, thereby suppressing NF-κB activation. TSG6 also prevented the expression of proinflammatory proteins (iNOS, IL-6, TNFα, IL-1β, and CXCL1) while increasing the expression of antiinflammatory proteins (CD206, Chi3l3, IL-4, and IL-10) in macrophages. This shift was associated with suppressed activation of proinflammatory transcription factors STAT1 and STAT3. In addition, we observed that LPS itself up-regulated the expression of TSG6 in TSG6 +/+ mice, suggesting an autocrine role for TSG6 in transitioning macrophages. Thus, TSG6 functions by converting macrophages from a proinflammatory to an anti-inflammatory phenotype secondary to suppression of TLR4/NF-κB signaling and STAT1 and STAT3 activation. However, there appears to be little constitutive expression of TSG6 (3). TSG6 is synthesized in response to proinflammatory mediators, including lipopolysaccharide (LPS), TNFα, and IL-1β (3-5). TSG6 is composed of an HA-binding LINK domain and a CUB (complement protein subcomponents C1r/C1s, urchin embryonic growth factor, and bone morphogenetic protein) domain (3, 4) To date, only the HA-binding protein CD44 has been shown to function as a TSG6 receptor (6).TSG6 has a potent but poorly understood function in suppressing inflammation through inhibition of neutrophil migration and production of proinflammatory cytokines (7,8). This effect of TSG6 has been demonstrated in several models. TSG6 was shown to prevent inflammation and tissue injury in rodent models of arthritis (9), myocardial infarction (10), corneal injury (11), and peritonitis (12). Both IL-1β and TNFα induced the synthesis of TSG6 in MSCs, monocytes/macrophages, and fibroblasts (2, 4, 5). Administration of human MSCs in mice prevented endotoxin (LPS)-induced acute lung injury (ALI), and, importantly, this effect was abrogated using cells pretreated with TSG6-siRNA to suppress TSG6 expression (13). TSG6 also delayed the onset of autoimmune diabetes by suppressing the activation of T cells and antigen-presenting cells (14), further supporting its role in dampening the adaptive immune response.In the present study, we addressed the role of TSG6 in ALI, an acute inflammatory disease that injures the lung's vascular barrier, resulting in severe protein-rich pulmonary edema and hypoxemia, associated with ∼50% mortality (15). There is a profound release of proinflammatory cytotoxic mediators from activated alveolar macrophages and other inflammatory cells sequestered in lungs (15). Macrophages in ALI are a...