<i>Acinetobacter baumannii</i> is an opportunistic pathogen that has recently emerged as a global threat associated with high morbidity, mortality, and antibiotic resistance. We determined the role of type I interferon (IFN) signaling in <i>A. baumannii</i> infection. We report that <i>A. baumannii</i> can induce a type I IFN response that is dependent upon TLR4-TRIF-IRF3 and phagocytosis of the bacterium. Phase variants of <i>A. baumannii</i> that have a reduced capsule, lead to enhanced TLR4-dependent type I IFN induction. This was also observed in a capsule-deficient strain. However, we did not observe a role for this pathway in vivo. The enhanced signaling could be accounted for by increased phagocytosis in capsule-deficient strains that also lead to enhanced host cell-mediated killing. The increased cytokine response in the absence of the capsule was not exclusive to type I IFN signaling. Several cytokines, including the proinflammatory IL-6, were increased in cells stimulated with the capsule-deficient strain, also observed in vivo. After 4 h in our acute pneumonia model, the burden of a capsule-null strain was significantly reduced, yet we observed increases in innate immune cells and inflammatory markers compared to wild-type <i>A. baumannii</i>. This study underscores the role of phase variation in the modulation of host immune responses and indicates that the capsule of <i>A. baumannii</i> plays an important role in protection against host cell killing and evasion from activation of the innate immune response.