Caveolin-1 (Cav1), the scaffolding protein of caveolae, has been shown to play an important role in host defense and inflammation. However, the underlying molecular basis for these actions remains elusive. Here, using double mutant mice with genetic deletions of Cav1 and NOS3, we show that chronic endothelial nitric oxide synthase (eNOS) activation secondary to loss of Cav1 serves a crucial immunomodulatory function through tyrosine nitration-mediated impairment of interleukin-1 receptor associated kinase (IRAK)4, a signaling component required for nuclear factor-kappaB activation and innate immunity. We observed an eNOS-dependent decrease in the plasma concentration of pro-inflammatory cytokines and marked improvement of survival in Cav1(-/-) mice following lipopolysaccharide challenge. Activation of eNOS secondary to loss of Cav1 resulted in decreased activation of nuclear factor-kappaB in response to lipopolysaccharide challenge, and thereby protected the animals from lipopolysaccharide-induced lung injury. IRAK4 was prominently nitrated in Cav1-deficient endothelial cells, whereas eNOS deletion in Cav1-deficient endothelial cells resulted in marked decrease of IRAK4 nitration and restored the inflammatory response after lipopolysaccharide challenge. Furthermore, in vitro nitration of IRAK4 resulted in impairment of the kinase activity. Thus, eNOS activation secondary to loss of Cav1 signals dampening of the innate immune response to lipopolysaccharide through IRAK4 nitration and the resultant impairment of kinase activity, and consequently mitigates inflammatory lung injury.