Toll-like receptor 4 (TLR4) is a component of the innate immune system that recognizes a diverse group of molecular structures, such as lipopolysaccharide (LPS) from Gram-negative bacteria. TLR4 signaling ultimately leads to activation of the transcription factor, nuclear factor κB (NF-κB), and the production of cytokines. Ceramide is a bioactive sphingolipid that has been suggested to regulate TLR4-induced NF-κB signaling, although reports on the role of ceramide in TLR4 activation conflict. We investigated the possibility that ceramide metabolites, such as ceramide-1-phosphate (C-1-P), may explain these discrepancies. We now report that exogenous C-1-P, but not ceramide, reduces NF-κB-mediated gene transcription in HEK 293 cells stably transfected with human TLR4, CD14, and MD-2. We demonstrate that inhibition of NF-κB by exogenous C-1-P is dose-dependent and specific to TLR4 in a reporter assay. We further demonstrate a requirement for both the phosphate moiety and the sphingoid backbone to inhibit LPS-activated NF-κB transcription. Specifically, C-1-P prevents the degradation of IκB, the phosphorylation of the p65 subunit of NF-κB, and LPS-stimulated MAPK activation. The functional consequence of C-1-P inhibition of NF-κB is a reduction in LPS-mediated cytokine release from HEK 293 TLR4-expressing cells and human peripheral blood mononuclear cells. Taken together, these data demonstrate that C-1-P may function as an anti-inflammatory lipid mediator of immune response.