The intestinal epithelium maintains a state of controlled inflammation despite continuous contact with Gram-negative commensal bacteria and lipopolysaccharide (LPS) on its luminal surface. Recognition of LPS by the Toll-like receptor (TLR) 4/MD-2 complex results in pro-inflammatory gene expression and cytokine secretion in intestinal epithelial cells (IECs). We have shown that IECs express low levels of MD-2 and TLR4 and are poorly responsive to LPS. In this study, we did a comprehensive analysis to understand the immune-mediated and epigenetic mechanisms by which IECs down-regulate MD-2 expression. Expression of MD-2 and TLR4 mRNA was examined in human inflammatory bowel disease and intestinal epithelial cell lines (T84, HT-29, Caco-2). Nuclear factor-kappaB transcriptional activation was used as a measure of LPS responsiveness. Intestinal epithelial cells in patients with inflammatory bowel disease exhibited increased expression of MD-2 and TLR4 mRNA. Lipopolysaccharide responsiveness in IECs was polarized to the basolateral membrane. Bisulfite sequencing of the MD-2 promoter demonstrated methylation of CpG dinucleotides. Inhibition of methylation by 5-azacytidine and histone de-actylation by trichostatin A, two forms of epigenetic silencing, resulted in increased mRNA expression of MD-2 in IECs. These results demonstrate various molecular mechanisms by which IECs down-regulate MD-2 and, thereby, protect against dysregulated inflammation to commensal bacteria in the intestinal lumen.