Many endogenous molecules, mostly proteins, purportedly activate the Toll-like receptor 4 (TLR4)–myeloid differentiation factor-2 (MD-2) complex, the innate immune receptor for lipopolysaccharide (LPS) derived from gram-negative bacteria. However, there is no structural evidence supporting direct TLR4–MD-2 activation by endogenous ligands. Sulfatides (3-O-sulfogalactosylceramides) are natural, abundant sulfated glycolipids that have variously been shown to initiate or suppress inflammatory responses. We show here that short fatty acid (FA) chain sulfatides directly activate mouse TLR4–MD-2 independent of CD14, trigger MyD88- and TRIF-dependent signaling, and stimulate tumor necrosis factor α (TNFα) and type I interferon (IFN) production in mouse macrophages. In contrast to the agonist activity toward the mouse receptor, the tested sulfatides antagonize TLR4–MD-2 activation by LPS in human macrophage-like cells. The agonistic and antagonistic activities of sulfatides require the presence of the sulfate group and are inversely related to the FA chain length. The crystal structure of mouse TLR4–MD-2 in complex with C16-sulfatide revealed that three C16-sulfatide molecules bound to the MD-2 hydrophobic pocket and induced an active dimer conformation of the receptor complex similar to that induced by LPS or lipid A. The three C16-sulfatide molecules partially mimicked the detailed interactions of lipid A to achieve receptor activation. Our results suggest that sulfatides may mediate sterile inflammation or suppress LPS-stimulated inflammation, and that additional endogenous negatively charged lipids with up to six lipid chains of limited length might also bind to TLR4–MD-2 and activate or inhibit this complex.