Activation of TLR4 by the endotoxin LPS is a critical event in the pathogenesis of Gram-negative sepsis. Caveolin-1, the signaling protein associated with caveolae, is implicated in regulating the lung inflammatory response to LPS; however, the mechanism is not understood. In this study, we investigated the role of caveolin-1 in regulating TLR4 signaling in endothelial cells. We observed that LPS interaction with CD14 in endothelial cells induced Src-dependent caveolin-1 phosphorylation at Tyr(14). Using a TLR4-MD2-CD14-transfected HEK-293 cell line and caveolin-1-deficient (cav-1(-/-)) mouse lung microvascular endothelial cells, we demonstrated that caveolin-1 phosphorylation at Tyr(14) following LPS exposure induced caveolin-1 and TLR4 interaction and, thereby, TLR4 activation of MyD88, leading to NF-κB activation and generation of proinflammatory cytokines. Exogenous expression of phosphorylation-deficient Y14F caveolin-1 mutant in cav-1(-/-) mouse pulmonary vasculature rendered the mice resistant to LPS compared with reintroduction of wild-type caveolin-1. Thus, caveolin-1 Y14 phosphorylation was required for the interaction with TLR4 and activation of TLR4-MyD88 signaling and sepsis-induced lung inflammation. Inhibiting caveolin-1 Tyr(14) phosphorylation and resultant inactivation of TLR4 signaling in pulmonary vascular endothelial cells represent a novel strategy for preventing sepsis-induced lung inflammation and injury.