We describe here a previously unrecognized property of dendritic cells (DCs), the ability to deacylate the lipid A moiety of gram-negative bacterial LPSs. Both immature DCs of the XS52 cell line and bone marrow–derived DCs produce acyloxyacyl hydrolase, an enzyme that detoxifies LPS by selectively removing the secondary acyl chains from lipid A. Acyloxyacyl hydrolase expression decreased when DCs were incubated with IL-4, IL-1β, TNFα, and an agonistic CD40 antibody (maturation cocktail), and increased after treatment with LPS, CpG oligodeoxynucleotides, or a gram-positive bacterium ( Micococcus luteus ). Maturation cocktail treatment also diminished, whereas LPS treatment enhanced or maintained the cells' ability to kill Escherichia coli , deacylate LPS, and degrade bacterial protein. Enzymatic deacylation of LPS is an intrinsic, regulated mechanism by which DCs may modulate host responses to this potent bacterial agonist.