11β-Hydroxysteroid dehydrogenase type 1 (11βHSD1) performs end-organ metabolism of glucocorticoids (GCs) by catalyzing the conversion of C 11-keto-GCs to C 11-hydroxy-GCs, thereby generating activating ligands for the GC receptor. In this study, we report that 11βHSD1−/− mice are more susceptible to endotoxemia, evidenced by increased weight loss and serum TNF-α, IL-6, and IL-12p40 levels following LPS challenge in vivo. Peritoneal and splenic macrophage (splnMφ) from these genetically altered mice overproduce inflammatory cytokines following LPS stimulation in vitro. Inflammatory cytokine overexpression by 11βHSD1−/− splnMφ results from an increased activation of NF-κB-and MAPK-signaling cascades and an attenuated PI3K-dependent Akt activation. The expression of SHIP1 is augmented in 11βHSD1−/− Mφ and contributes to inflammatory cytokine production because overexpression of SHIP1 in primary bone marrow Mφ (BMMφ) leads to a similar type of hyperresponsiveness to subsequent LPS stimulation. 11βHSD1+/+ and 11βHSD1−/− BMMφ responded to LPS similarly. However, 11βHSD1−/− BMMφ derived in the presence of elevated GC levels up-regulated SHIP1 expression and increased their capacity to produce inflammatory cytokines following their activation with LPS. These observations suggest the hyperresponsiveness of 11βHSD1−/− splnMφ results from myeloid cell differentiation in the presence of moderately elevated GC levels found within 11βHSD1−/− mice. GC-conditioning of BMMφ enhanced SHIP1 expression via up-regulation of bioactive TGF-β. Consistently, TGF-β protein expression was increased in unstimulated CD11b− cells residing in the BM and spleen of 11βHSD1−/− mice. Our results suggest that modest elevations in plasma GC levels can modify the LPS responsiveness of Mφ by augmenting SHIP1 expression through a TGF-β-dependent mechanism.