Bcl-3 is an atypical member of the IκB family that has the potential to positively or negatively modulate nuclear NF-κB activity in a context-dependent manner. Bcl-3's biologic impact is complex and includes roles in tumorigenesis and diverse immune responses, including innate immunity. Bcl-3 may mediate LPS tolerance, suppressing cytokine production, but it also seems to contribute to defense against select systemic bacterial challenges. However, the potential role of Bcl-3 in organ-specific host defense against bacteria has not been addressed. In this study, we investigated the relevance of Bcl-3 in a lung challenge with the Gram-negative pathogen Klebsiella pneumoniae. In contrast to wild-type mice, Bcl-3-deficient mice exhibited significantly increased susceptibility toward K. pneumoniae pneumonia. The mutant mice showed increased lung damage marked by neutrophilic alveolar consolidation, and they failed to clear bacteria in lungs, which correlated with increased bacteremic dissemination. Loss of Bcl-3 incurred a dramatic cytokine imbalance in the lungs, which was characterized by higher levels of IL-10 and a near total absence of IFN-γ. Moreover, Bcl-3-deficient mice displayed increased lung production of the neutrophil-attracting chemokines CXCL-1 and CXCL-2. Alveolar macrophages and neutrophils are important to antibacterial lung defense. In vitro stimulation of Bcl-3-deficient alveolar macrophages with LPS or heat-killed K. pneumoniae recapitulated the increase in IL-10 production, and Bcl-3-deficient neutrophils were impaired in intracellular bacterial killing. These findings suggest that Bcl-3 is critically involved in lung defense against Gram-negative bacteria, modulating functions of several cells to facilitate efficient clearance of bacteria.