The expression of Toll-like receptor (TLR)-9, a pathogen recognition receptor that recognizes unmethylated CpG sequences in microbial DNA molecules, is linked to the pathogenesis of several lung diseases. TLR9 expression and signaling was investigated in animal and cell models of chronic obstructive pulmonary disease (COPD). We observed enhanced TLR9 expression in mouse lungs following exposure to cigarette smoke. Tlr9(-/-) mice were resistant to cigarette smoke-induced loss of lung function as determined by mean linear intercept, total lung capacity, lung compliance, and tissue elastance analysis. Tlr9 expression also regulated smoke-mediated immune cell recruitment to the lung; apoptosis; expression of granulocyte-colony stimulating factor (G-CSF), the CXCL5 protein, and matrix metalloproteinase-2 (MMP-2); and protein tyrosine phosphatase 1B (PTP1B) activity in the lung. PTP1B, a phosphatase with anti-inflammatory abilities, was identified as binding to TLR9. In vivo delivery of a TLR9 agonist enhanced TLR9 binding to PTP1B, which inactivated PTP1B. Ptp1b(-/-) mice had elevated lung concentrations of G-CSF, CXCL5, and MMP-2, and tissue expression of type-1 interferon following TLR9 agonist administration, compared with wild-type mice. TLR9 responses were further determined in fully differentiated normal human bronchial epithelial (NHBE) cells isolated from nonsmoker, smoker, and COPD donors, and then cultured at air liquid interface. NHBE cells from smokers and patients with COPD expressed more TLR9 and secreted greater levels of G-CSF, IL-6, CXCL5, IL-1β, and MMP-2 upon TLR9 ligand stimulation compared with cells from nonsmoker donors. Although TLR9 combats infection, our results indicate that TLR9 induction can affect lung function by inactivating PTP1B and upregulating expression of proinflammatory cytokines.