Toll-like receptor 4 (TLR4) and MD-2 recognizes lipid A, the active moiety of microbial lipopolysaccharide (LPS). Little is known about mechanisms for LPS recognition by TLR4-MD-2. Here we show ligand-induced TLR4 oligomerization, homotypic interaction of TLR4, which directly leads to TLR4 signaling. Since TLR4 oligomerization normally occurred in the absence of the cytoplasmic portion of TLR4, TLR4 oligomerization works upstream of TLR4 signaling. Lipid IVa, a lipid A precursor, is agonistic on mouse TLR4-MD-2 but turns antagonistic on chimeric mouse TLR4-human MD-2, demonstrating that the antagonistic activity of lipid IVa is determined by human MD-2. Binding studies with radioactive lipid A and lipid IVa revealed that lipid IVa is similar to lipid A in dose-dependent and saturable binding to mouse TLR4-human MD-2. Lipid IVa, however, did not induce TLR4 oligomerization, and inhibited lipid A-dependent oligomerization of mouse TLR4-human MD-2. Thus, lipid IVa binds mouse TLR4-human MD-2 but does not trigger TLR4 oligomerization. Binding study further revealed that the antagonistic activity of lipid IVa correlates with augmented maximal binding to mouse TLR4-human MD-2, which was approximately 2-fold higher than lipid A. Taken together, lipid A antagonist lipid IVa is distinct from lipid A in binding to TLR4-MD-2 and in subsequent triggering of TLR4 oligomerization. Given that the antagonistic activity of lipid IVa is determined by MD-2, MD-2 has an important role in a link between ligand interaction and TLR4 oligomerization.