Islet allografts from donor mice exposed to CO are protected from immune rejection after transplantation via the suppression of membrane trafficking/activation of TLR4 in islets/beta cells. The molecular mechanisms of how CO suppresses TLR4 activation in beta cells remain unclear and are the focus of this study. Cells of the insulinoma cell line, betaTC3, were stably transfected with pcDNA3-TLR4-YFP and pDsRed-Monomer-Golgi plasmids and used to identify the subcellular distribution of TLR4 before and after LPS stimulation by confocal microscopy. Immunofluorescence analysis revealed that TLR4 mainly resides in the Golgi apparatus in betaTC3 cells when in a quiescent state. LPS stimulation led to a rapid trafficking of TLR4 from the Golgi to the cell membrane. Physical interaction between TLR4 and myeloid differentiation factor-2 (MD-2) was confirmed by immunoprecipitation. Depleting MD-2 using small interfering RNA or blocking the N-glycosylation of cells using tunicamycin blocked membrane trafficking of TLR4. Pre-exposing cells to CO at a concentration of 250 parts per million suppressed membrane trafficking of TLR4 via inhibiting its glycosylation and the interaction between TLR4 and MD-2. In conclusion, MD-2 is required for the glycosylation of TLR4 and its consequent membrane trafficking in betaTC3 cells. CO suppresses membrane activation of TLR4 via blocking its glycosylation and the physical interaction between TLR4 and MD-2.