The detection of Gram-negative LPS depends upon the proper function of the TLR4-MD-2 receptor complex in immune cells. TLR4 is the signal transduction component of the LPS receptor, whereas MD-2 is the endotoxin-binding unit. MD-2 appears to activate TLR4 when bound to TLR4 and ligated by LPS. Only the monomeric form of MD-2 was found to bind LPS and only monomeric MD-2 interacts with TLR4. Monomeric MD-2 binds TLR4 with an apparent Kd of 12 nM; this binding avidity was unaltered in the presence of endotoxin. E5564, an LPS antagonist, appears to inhibit cellular activation by competitively preventing the binding of LPS to MD-2. Depletion of endogenous soluble MD-2 from human serum, with an immobilized TLR4 fusion protein, abrogated TLR4-mediated LPS responses. By determining the concentration of added-back MD-2 that restored normal LPS responsiveness, the concentration of MD-2 was estimated to be approximately 50 nM. Similarly, purified TLR4-Fc fusion protein, when added to the supernatants of TLR4-expressing cells in culture, inhibited the interaction of MD-2 with TLR4, thus preventing LPS stimulation. The ability to inhibit the effects of LPS as a result of the binding of TLR4-Fc or E5564 to MD-2 highlights MD-2 as the logical target for drug therapies designed to pharmacologically intervene against endotoxin-induced disease.