Gfi1 is a 55-kD nuclear zinc finger protein that is differentially expressed in lymphoid and myeloid cells. Gfi1(-/-) mice show a very strong systemic response to the endotoxin LPS and die rapidly within 36 h with symptoms of septic shock. Here we report that the pathohysiological processes for this exaggerated inflammatory response take place in the lung. After LPS treatment, lungs of Gfi1(-/-) mice showed a rapid accumulation of mononuclear cells and a significant overproduction of inflammatory cytokines such as TNF, IL-1beta and IL-6. Increased cytokine production was also observed in blood-free perfused lungs from Gfi1(-/-) mice exposed to either LPS or overventilation. Alveolar macrophages but not airway epithelial cells from Gfi1(-/-) mice were found to be responsible for the enhanced cytokine production. Strikingly, when the TNF gene was deleted, Gfi1(-/-) animals were completely rescued from LPS hypersensitivity and had significantly lower IL-1beta and IL-6 levels. We conclude that the unrestrained endotoxin response of Gfi1(-/-) mice occurs mainly in the lung and that Gfi1 represents a novel factor limiting the inflammatory immune response of this organ, and propose that Gfi1 exerts its regulatory function in alveolar macrophages downstream of the LPS receptor (TLR4) and upstream of TNF.