Endotoxin (LPS), a Gram-negative cell wall component, has potent proinflammatory properties. Acute LPS exposure causes airway inflammation; chronic exposure causes airway hyperreactivity and remodeling. IL-10 is an important antiinflammatory cytokine, which is decreased in patients with airway disease, such as asthma and cystic fibrosis. To examine the physiologic and therapeutic role of IL-10 in acute and chronic LPS-induced airway disease. Mice were exposed to aerosolized LPS once or daily for 4 wk. Endpoints were airway inflammation, airway reactivity to methacholine, extracellular matrix protein expression, and histologic analysis. IL-10-deficient mice developed significantly enhanced airway cellularity and remodeling when compared with C57BL/6 mice after chronic LPS inhalation. However they demonstrated less airway hyperreactivity associated with higher inducible nitric oxide synthase (iNOS), endothelial NOS (eNOS), and lung lavage fluid nitrite levels. In a bone marrow transplantation model, the IL-10 antiinflammatory effect was dependent on the hematopoietic but not on the parenchymal IL-10 expression. Induced epithelial human IL-10 expression protected from the LPS effects and led to decreased collagen production. IL-10 attenuates chronic LPS-induced airway inflammation and remodeling. Physiologically, the antiinflammatory effect of IL-10 is mediated by hematopoietic cells. Therapeutically, adenovirus-driven expression of human IL-10 in airway epithelia is sufficient for its protective effect on inflammation and remodeling. The role of IL-10 on airway hyperreactivity is complex: IL-10 deficiency protects against LPS-induced hyperreactivity, and is associated with higher eNOS, iNOS, and airway nitrate levels.