Caveolin-1, the principal structural and signaling protein of caveolae, is implicated in NO-mediated cell signaling events, but its precise role in inflammation is not well understood. Using caveolin-1-knockout (Cav-1−/−) mice, we addressed the role of caveolin-1 in the lung inflammatory response to sepsis induced by ip injection of LPS. LPS-challenged wild-type (WT) lungs exhibited significant increases in neutrophil sequestration (∼ 16-fold), lung microvascular permeability K f, c (∼ 5.7-fold), and edema formation (∼ 1.6-fold). Compared with WT, Cav-1−/− lungs showed marked attenuation of LPS-induced neutrophil sequestration (∼ 11-fold increase) and inhibition of microvascular barrier breakdown and edema formation. Prevention of lung injury in Cav-1−/− mice was associated with decreased mortality in response to LPS challenge. To address the basis of the reduced inflammation and injury in Cav-1−/− lungs, we examined the role of NO because its plasma concentration is known to be increased in Cav-1−/− mice. Cav-1−/− mouse lungs demonstrated a significant increase in endothelial NO synthase (eNOS)-derived NO production relative to WT, which is consistent with the role of caveolin-1 as a negative regulator of eNOS activity. Cav-1−/− lungs concurrently showed suppression of NF-κB activity and decreased transcription of inducible NO synthase and ICAM-1. Coadministration of LPS with the NO synthase inhibitor nitro-l-arginine in Cav-1−/− mice prevented the suppression of NF-κB activity and restored lung polymorphonuclear leukocyte sequestration in response to LPS challenge. Thus, caveolin-1, through its ability to regulate eNOS-derived NO production, is a crucial determinant of NF-κB activation and the lung inflammatory response to LPS.