Although dual-specificity phosphatase 5 (DUSP5), which inactivates extracellular signal-regulated kinase (ERK), suppresses tumors in several types of cancer, its functional roles remain largely unknown. Here, we show that DUSP5 is induced during lipopolysaccharide (LPS)-mediated inflammation and inhibits nuclear factor-κB (NF-κB) activity. DUSP5 mRNA and protein expression increased transiently in LPS-stimulated RAW 264.7 cells and then returned to basal levels. DUSP5 overexpression in RAW 264.7 cells suppressed the production of pro-inflammatory tumor necrosis factor-alpha (TNF-α) and interleukin-6 (IL-6), whereas knockdown of DUSP5 increased their expression. Investigation of two major inflammatory signaling pathways, mitogen-activated protein kinase (MAPK) and NF-κB, using activator protein-1 (AP-1) and NF-κB reporter plasmids, respectively, showed that NF-κB transcription activity was downregulated by DUSP5 in a phosphatase activity-independent manner whereas AP-1 activity was inhibited by DUSP5 phosphatase activity towards ERK,. Further investigation showed that DUSP5 directly interacts with transforming growth factor beta-activated kinase 1 (TAK1) and inhibitor of κB (IκB) kinases (IKKs) but not with IκBα. DUSP5 binding to IKKs interfered with the association of TAK1 with IKKs, suggesting that DUSP5 might act as a competitive inhibitor of TAK1-IKKs association. Therefore, we propose that DUSP5 negatively regulates ERK and NF-κB in a phosphatase activity-dependent and -independent manner, respectively.