Excessive proinflammatory cytokine and NO production by activated microglia play a role in neurodegenerative disorders. In this study, we found that a new compound KL-1037 suppressed LPS-induced NO release/inducible nitric oxide synthase expression in BV2 mouse microglial cells. In addition, KL-1037 prominently diminished LPS-induced production of pro-inflammatory cytokines such as TNF-alpha, IL-1 beta and IL-6, while it increased anti-inflammatory IL-10 and TGF-beta 1 production. By RNase protection assay and RT-PCR, we showed that KL-1037 regulated iNOS and cytokines at transcriptional or post-transcriptional level. Further analysis of molecular mechanisms revealed that KL-1037 prominently increased intracellular cAMP levels and potentiated LPS-induced pCREB expression. However, LPS-induced MAP kinase or NF-kappa B activities were slightly or little changed by KL-1037. Treatment with cAMP antagonist or IL-10 neutralizing antibody completely reversed upregulation of IL-10 and partially repression of TNF-alpha or NO induced by KL-1037. These data suggest that microglial inactivation by KL-1037 is at least in part due to activation of PKA pathway and/or upregulation of IL-10. Thus, repressing proinflammatory cytokines and iNOS gene expression in activated microglia by KL-1037 may provide potential therapeutic strategies for various neurodegenerative diseases including ischemic cerebral disease.