Toll-like receptors (TLRs) detect microorganisms and protect multicellular organisms from infection. TLRs transduce their signals through MyD88 and the serine/threonine kinase IRAK. The IRAK family consists of two active kinases, IRAK and IRAK-4, and two inactive kinases, IRAK-2 and IRAK-M. IRAK-M expression is restricted to monocytes/macrophages, whereas other IRAKs are ubiquitous. We show here that IRAK-M is induced upon TLR stimulation and negatively regulates TLR signaling. IRAK-M prevented dissociation of IRAK and IRAK-4 from MyD88 and formation of IRAK-TRAF6 complexes. IRAK-M(-/-) cells exhibited increased cytokine production upon TLR/IL-1 stimulation and bacterial challenge, and IRAK-M(-/-) mice showed increased inflammatory responses to bacterial infection. Endotoxin tolerance, a protection mechanism against endotoxin shock, was significantly reduced in IRAK-M(-/-) cells. Thus, IRAK-M regulates TLR signaling and innate immune homeostasis.