Toll-like receptor 4 (TLR4)-mediated signaling plays a critical role in sepsis-induced acute lung injury (ALI). LYRM03 (3-amino-2-hydroxy-4-phenyl-valyl-isoleucine) is a novel derivative of ubenimex, a widely used antineoplastic medicine. We previously found that LYRM03 has anti-inflammatory effects in cecal ligation puncture mouse model. In this study we determined whether LYRM03 attenuated LPS-induced ALI in mice. LPS-induced ALI mouse model was established by challenging the mice with intratracheal injection of LPS (5 mg/kg), which was subsequently treated with LYRM03 (10 mg/kg, ip). LYRM03 administration significantly alleviated LPS-induced lung edema, inflammatory cell (neutrophils and macrophages) infiltration and myeloperoxidase (MPO) activity, decreased pro-inflammatory and chemotactic cytokine (TNF-α, IL-6, IL-1β, MIP-2) generation and reduced iNOS and COX-2 expression in the lung tissues. In cultured mouse alveolar macrophages in vitro, pretreatment with LYRM03 (100 μmol/L) suppressed LPS-induced macrophage activation by reducing Myd88 expression, increasing IκB stability and inhibiting p38 phosphorylation. These results suggest that LYRM03 effectively attenuates LPS-induced ALI by inhibiting the expression of pro-inflammatory mediators and Myd88-dependent TLR4 signaling pathways in alveolar macrophages. LYRM03 may serve as a potential treatment for sepsis-mediated lung injuries.