We have previously reported that TLR4 signaling is increased in LPS-stimulated cystic fibrosis (CF) macrophages (MΦs), contributing to the robust production of proinflammatory cytokines. The heme oxygenase-1 (HO-1)/CO pathway modulates cellular redox status, inflammatory responses, and cell survival. The HO-1 enzyme, together with the scaffold protein caveolin 1 (CAV-1), also acts as a negative regulator of TLR4 signaling in MΦs. In this study, we demonstrate that in LPS-challenged CF MΦs, HO-1 does not compartmentalize normally to the cell surface and instead accumulates intracellularly. The abnormal HO-1 localization in CF MΦs in response to LPS is due to decreased CAV-1 expression, which is controlled by the cellular oxidative state, and is required for HO-1 delivery to the cell surface. Overexpression of HO-1 or stimulating the pathway with CO-releasing molecules enhances CAV-1 expression in CF MΦs, suggesting a positive-feed forward loop between HO-1/CO induction and CAV-1 expression. These manipulations re-established HO-1 and CAV-1 cell surface localization in CF MΦs. Consistent with restoration of HO-1/CAV-1-negative regulation of TLR4 signaling, genetic or pharmacological (CO-releasing molecule 2) induced enhancement of this pathway decreased the inflammatory response of CF MΦs and CF mice treated with LPS. In conclusion, our results demonstrate that the counterregulatory HO-1/CO pathway, which is critical in balancing and limiting the inflammatory response, is defective in CF MΦs through a CAV-1-dependent mechanism, exacerbating the CF MΦ response to LPS. This pathway could be a potential target for therapeutic intervention for CF lung disease.