In humans, environmental exposure to a high dose of lipopolysaccharide (LPS) protects from allergic asthma, the immunological underpinnings of which are not well understood. In mice, exposure to a high LPS dose blunted house dust mite-induced airway eosinophilia and T-helper 2 (Th2) cytokine production. Although adoptively transferred Th2 cells induced allergic airway inflammation in control mice, they were unable to do so in LPS-exposed mice. LPS promoted the development of a CD11b(+)Gr1(int)F4/80(+) lung-resident cell resembling myeloid-derived suppressor cells in a Toll-like receptor 4 and myeloid differentiation factor 88 (MyD88)-dependent manner that suppressed lung dendritic cell (DC)-mediated reactivation of primed Th2 cells. LPS effects switched from suppressive to stimulatory in MyD88(-/-) mice. Suppression of Th2 effector function was reversed by anti-interleukin-10 (IL-10) or inhibition of arginase 1. Lineage(neg) bone marrow progenitor cells could be induced by LPS to develop into CD11b(+)Gr1(int)F4/80(+)cells both in vivo and in vitro that when adoptively transferred suppressed allergen-induced airway inflammation in recipient mice. These data suggest that CD11b(+)Gr1(int)F4/80(+) cells contribute to the protective effects of LPS in allergic asthma by tempering Th2 effector function in the tissue.