The endocannabinoid arachidonoyl ethanolamine (anandamide) is a lipid transmitter synthesized and released ''on demand'' by neurons in the brain. Anandamide is also generated by macrophages where its endotoxin (LPS)-induced synthesis has been implicated in the hypotension of septic shock and advanced liver cirrhosis. Anandamide can be generated from its membrane precursor, N-arachidonoyl phosphatidylethanolamine (NAPE) through cleavage by a phospholipase D (NAPE-PLD). Here we document a biosynthetic pathway for anandamide in mouse brain and RAW264.7 macrophages that involves the phospholipase C (PLC)-catalyzed cleavage of NAPE to generate a lipid, phosphoanandamide, which is subsequently dephosphorylated by phosphatases, including PTPN22, previously described as a protein tyrosine phosphatase. Bacterial endotoxin (LPS)-induced synthesis of anandamide in macrophages is mediated exclusively by the PLC͞phosphatase pathway, which is up-regulated by LPS, whereas NAPE-PLD is down-regulated by LPS and functions as a salvage pathway of anandamide synthesis when the PLC͞phosphatase pathway is compromised. Both PTPN22 and endocannabinoids have been implicated in autoimmune diseases, suggesting that the PLC͞phosphatase pathway of anandamide synthesis may be a pharmacotherapeutic target.biosynthesis ͉ phosphatase ͉ phospholipase C ͉ phosphoanandamide T he endocannabinoid N-arachidonoyl ethanolamine (anandamide, AEA) is a lipid transmitter synthesized and released ''on demand'' by neurons in the brain (1). AEA is also generated by macrophages (2), where its bacterial endotoxin (LPS)-induced synthesis has been implicated in the hypotension of septic shock (3, 4) and liver cirrhosis (5, 6). Macrophage-derived AEA has been also implicated in antiinflammatory effects both in the periphery (7) and in the central nervous system (8, 9). AEA is thought to be generated from its membrane precursor, N-arachidonoyl phosphatidylethanolamine (NAPE), through cleavage by a phospholipase D (NAPE-PLD) (10, 11), upregulation of which can result in increased tissue levels of AEA (12). We earlier reported that LPS potently stimulates AEA synthesis in RAW264.7 mouse macrophages, in which it increases both the generation of NAPE from [ 14 C]diarachidonoyl phosphatidylcholine and the conversion of NAPE to AEA (4). Because these effects could be prevented by inhibitors of RNA transcription or protein synthesis (4), we hypothesized that LPS induces the expression of proteins involved in the biosynthesis of AEA, and a subtraction cloning strategy using resting and LPS-treated macrophages may help identifying such proteins. Although a specific N-acyltransferase (NAT) involved in the generation of NAPE has not yet been discovered, a NAPEspecific PLD has been identified and its ability to generate AEA from NAPE has been established (11). The results presented here indicate that, unexpectedly, NAPE-PLD is not involved in the stimulated synthesis of AEA in RAW264.7 macrophages. Instead, we identified the lipid phosphoanandamide (pAEA), which is also presen...