Phagocytosis of IgG-coated particles via FcgammaR is accompanied by the generation of superoxide and inflammatory cytokines, which can cause collateral tissue damage in the absence of regulation. Molecular mechanisms regulating these phagocytosis-associated events are not known. SHIP is an inositol phosphatase that downregulates PI3K-mediated activation events. Here, we have examined the role of SHIP in FcgammaR-induced production of superoxide and inflammatory cytokines. We report that primary SHIP-deficient bone marrow macrophages produce elevated levels of superoxide upon FcgammaR clustering. Analysis of the molecular mechanism revealed that SHIP regulates upstream Rac-GTP binding, an obligatory event for superoxide production. Likewise, SHIP-deficient macrophages displayed enhanced IL-1beta and IL-6 production in response to FcgammaR clustering. Interestingly, whereas IL-6 production required activation of both PI3K and Ras/Erk pathways, IL-1beta production was dependent only on Ras/Erk activation, suggesting that SHIP may also regulate the Ras/Erk pathway in macrophages. Consistently, SHIP-deficient macrophages displayed enhanced activation of Erk upon FcgammaR clustering. Inhibition of Ras/Erk or PI3K suppressed the enhanced production of IL-6 in SHIP-deficient macrophages. In contrast, inhibition of Ras/Erk, but not PI3K, suppressed IL-1beta production in these cells. Together, these data demonstrate that SHIP regulates phagocytosis-associated events through the inhibition of PI3K and Ras/Erk pathways.