In this study, we sought the possibility of a new therapeutic strategy for dampening endotoxin-induced inflammation using soluble form of extracellular rTLR4 domain (sTLR4) and soluble form of rMD-2 (sMD-2). Addition of sTLR4 plus sMD-2 was significantly effective in inhibiting LPS-elicited IL-8 release from U937 cells and NF-kappaB activation in the cells transfected with TLR4 and MD-2 when compared with a single treatment with sTLR4 or sMD-2. Thus, we investigated the role of the extracellular TLR4 domain in interaction of lipid A with MD-2. Biotinylated sTLR4 failed to coprecipitate [(3)H]lipid A when it was sedimented with streptavidin-agarose, demonstrating that the extracellular TLR4 domain does not directly bind lipid A by itself. The amounts of lipid A coprecipitated with sMD-2 significantly increased when coincubated with sTLR4, and sTLR4 increased the affinity of lipid A for the binding to sMD-2. Soluble CD14 is required for the sTLR4-stimulated increase of lipid A binding to sMD-2. We also found that addition of sTLR4 plus sMD-2 inhibited the binding of Alexa-conjugated LPS to the cells expressing TLR4 and MD-2. Murine lungs that had received sTLR4 plus sMD-2 with LPS did not show any findings indicative of interstitial edema, neutrophil flux, and hemorrhage. Co-instillation of sTLR4 plus sMD-2, but not sTLR4 or sMD-2 alone, significantly decreased neutrophil infiltration and TNF-alpha levels in bronchoalveolar lavage fluids from LPS-treated mice. This study provides novel usage of sTLR4 and sMD-2 as an antagonist against endotoxin-induced pulmonary inflammation.