LPS stimulates monocytes/macrophages through TLR4, resulting in the activation of a series of signaling events that potentiate the production of inflammatory mediators. Recent reports indicated that the inflammatory response to LPS is diminished by PI3K, through the activation of the serine/threonine kinase Akt. SHIP is an inositol phosphatase that can reverse the activation events initiated by PI3K, including the activation of Akt. However, it is not known whether SHIP is involved in TLR4 signaling. In this study, we demonstrate that LPS stimulation of Raw 264.7 mouse macrophage cells induces the association of SHIP with lipid rafts, along with IL-1R-associated kinase. In addition, SHIP is tyrosine phosphorylated upon LPS stimulation. Transient transfection experiments analyzing the function of SHIP indicated that overexpression of a wild-type SHIP, but not the SHIP Src homology 2 domain-lacking catalytic activity, up-regulates NF-kappaB-dependent gene transcription in response to LPS stimulation. These results suggest that SHIP positively regulates LPS-induced activation of Raw 264.7 cells. To test the validity of these observations in primary macrophages, LPS-induced events were compared in bone marrow macrophages derived from SHIP(+/+) and SHIP(-/-) mice. Results indicated that LPS-induced MAPK phosphorylation is enhanced in SHIP(+/+) cells, whereas Akt phosphorylation is enhanced in SHIP(-/-) cells compared with SHIP(+/+) cells. Finally, LPS-induced TNF-alpha and IL-6 production was significantly lower in SHIP(-/-) bone marrow-derived macrophages. These results are the first to demonstrate a role for SHIP in TLR4 signaling, and propose that SHIP is a positive regulator of LPS-induced inflammation.