Whereas recognition of LPS by the MD-2—TLR4 receptor complex is important for triggering protective inflammatory responses in animals, terminating many of these responses requires LPS inactivation by a host lipase, acyloxyacyl hydrolase (AOAH). To test if endogenously-produced recombinant AOAH can modulate responses to LPS and Gram-negative bacteria, we engineered transgenic mice that overexpress AOAH in dendritic cells and macrophages, cell types that normally produce it. Transgenic mice deacylated LPS more rapidly than did wildtype controls. They were also protected from LPS-induced hepatosplenomegaly, recovered more quickly from LPS-induced weight loss, and were more likely to survive when challenged with live E. coli. Constitutive overexpression of AOAH in vivo hastened recovery from LPS exposure without interfering with the normal acute inflammatory response to this important microbial signal molecule. Our results suggest that the extent to which macrophages and dendritic cells produce AOAH may influence the outcome of many Gram-negative bacterial diseases.