Shedding of the extracellular domain of cytokine receptors allows the diffusion of soluble receptors into the extracellular space; these then bind and neutralize their cytokine ligands, thus dampening inflammatory responses. The molecular mechanisms that control this process, and the extent to which shedding regulates cytokine-induced microvascular inflammation, are not well defined. Here, we used real-time confocal microscopy of mouse lung microvascular endothelium to demonstrate that mitochondria are key regulators of this process. The proinflammatory cytokine soluble TNF-α (sTNF-α) increased mitochondrial Ca2+, and the purinergic receptor P2Y2 prolonged the response. Concomitantly, the proinflammatory receptor TNF-α receptor-1 (TNFR1) was shed from the endothelial surface. Inhibiting the mitochondrial Ca2+ increase blocked the shedding and augmented inflammation, as denoted by increases in endothelial expression of the leukocyte adhesion receptor E-selectin and in microvascular leukocyte recruitment. The shedding was also blocked in microvessels after knockdown of a complex III component and after mitochondria-targeted catalase overexpression. Endothelial deletion of the TNF-α converting enzyme (TACE) prevented the TNF-α receptor shedding response, which suggests that exposure of microvascular endothelium to sTNF-α induced a Ca2+-dependent increase of mitochondrial H2O2 that caused TNFR1 shedding through TACE activation. These findings provide what we believe to be the first evidence that endothelial mitochondria regulate TNFR1 shedding and thereby determine the severity of sTNF-α-induced microvascular inflammation.