The generation of reactive oxygen species is a central feature of inflammation that results in the oxidation of host phospholipids. Oxidized phospholipids, such as 1-palmitoyl-2-arachidonyl-sn-glycero-3- phosphorylcholine (OxPAPC), have been shown to inhibit signaling induced by bacterial lipopeptide or lipopolysaccharide (LPS), yet the mechanisms responsible for the inhibition of Toll-like receptor (TLR) signaling by OxPAPC remain incompletely understood. Here, we examined the mechanisms by which OxPAPC inhibits TLR signaling induced by diverse ligands in macrophages, smooth muscle cells, and epithelial cells. OxPAPC inhibited tumor necrosis factor-alpha production, I kappa B alpha degradation, p38 MAPK phosphorylation, and NF-kappa B-dependent reporter activation induced by stimulants of TLR2 and TLR4 (Pam(3)CSK(4) and LPS) but not by stimulants of other TLRs (poly(I.C), flagellin, loxoribine, single-stranded RNA, or CpG DNA) in macrophages and HEK-293 cells transfected with respective TLRs and significantly reduced inflammatory responses in mice injected subcutaneously or intraperitoneally with Pam(3)CSK(4). Serum proteins, including CD14 and LPS-binding protein, were identified as key targets for the specificity of TLR inhibition as supplementation with excess serum or recombinant CD14 or LBP reversed TLR2 inhibition by OxPAPC, whereas serum accessory proteins or expression of membrane CD14 potentiated signaling via TLR2 and TLR4 but not other TLRs. Binding experiments and functional assays identified MD2 as a novel additional target of OxPAPC inhibition of LPS signaling. Synthetic phospholipid oxidation products 1-palmitoyl-2-(5-oxovaleryl)-sn-glycero-3-phosphocholine and 1-palmitoyl-2-glutaryl-sn-glycero-3-phosphocholine inhibited TLR2 signaling from similar to 30 mu M. Taken together, these results suggest that oxidized phospholipid-mediated inhibition of TLR signaling occurs mainly by competitive interaction with accessory proteins that interact directly with bacterial lipids to promote signaling via TLR2 or TLR4.