Src homology 2 (SH2) domain-containing inositol-5-phosphatase 1 (SHIP1) plays important roles in negatively regulating the activation of immune cells primarily via the phosphoinositide 3-kinase (PI-3K) pathway by catalyzing the PI-3K product PtdIns-3,4,5P3 (phosphatidylinositol-3,4,5-triphosphate) into PtdIns-3,4P2. However, the role of SHIP1 in Toll-like receptor 4 (TLR4)-mediated lipopolysaccharide (LPS) response remains unclear. Here we demonstrate that SHIP1 negatively regulates LPS-induced inflammatory response via both phosphatase activity-dependent and -independent mechanisms in macrophages. SHIP1 becomes tyrosine phosphorylated and up-regulated upon LPS stimulation in RAW264.7 macrophages. SHIP1-specific RNA-interfering and SHIP1 overexpression experiments demonstrate that SHIP1 inhibits LPS-induced tumor necrosis factor α (TNF-α) and interleukin 6 (IL-6) production by negatively regulating the LPS-induced combination between TLR4 and myeloid differentiation factor 88 (MyD88); activation of Ras (p21^ras protein), PI-3K, extracellular signal-regulated kinase 1/2 (ERK1/2), p38, and c-Jun NH2-terminal kinase (JNK); and degradation of IκB-α. SHIP1 also significantly inhibits LPS-induced mitogen-activated protein kinase (MAPK) activation in TLR4-reconstitited COS7 cells. Although SHIP1-mediated inhibition of PI-3K is dependent on its phosphatase activity, phosphatase activity-disrupted mutant SHIP1 remains inhibitory to LPS-induced TNF-α production. Neither disrupting phosphatase activity nor using the PI-3K pathway inhibitor LY294002 or wortmannin could significantly block SHIP1-mediated inhibition of LPS-induced ERK1/2, p38, and JNK activation and TNF-α production, demonstrating that SHIP1 inhibits LPS-induced activation of MAPKs and cytokine production primarily by a phosphatase activity- and PI-3K-independent mechanism. (Blood. 2005;105:4685-4692)