Specific therapies targeting cellular and molecular events of sepsis induced Acute Lung Injury (ALI) pathogenesis are lacking. We have reported a pivotal role for Nuclear Factors of Activated T cells (NFATc3) in regulating macrophage phenotype during sepsis induced ALI and subsequent studies demonstrate that NFATc3 transcriptionally regulates macrophage CCR2 and TNFα gene expression. Mouse pulmonary microvascular endothelial cell monolayer maintained a tighter barrier function when co-cultured with LPS stimulated NFATc3 deficient macrophages whereas wild type macrophages caused leaky monolayer barrier. More importantly, NFATc3 deficient mice showed decreased neutrophilic lung inflammation, improved alveolar capillary barrier function, arterial oxygen saturation and survival benefit in lethal CLP sepsis mouse models. In addition, survival of wild type mice subjected to the lethal CLP sepsis was not improved with broad-spectrum antibiotics, whereas the survival of NFATc3 deficient mice was improved to 40–60% when treated with imipenem. Passive adoptive transfer of NFATc3 deficient macrophages conferred protection against LPS induced ALI in wild type mice. Furthermore, CP9-ZIZIT, a highly potent, cell-permeable peptide inhibitor of Calcineurin inhibited NFATc3 activation. CP9-ZIZIT effectively reduced sepsis induced inflammatory cytokines and pulmonary edema in mice. Thus, this study demonstrates that inhibition of NFATc3 activation by CP9-ZIZIT provides a potential therapeutic option for attenuating sepsis induced ALI/pulmonary edema.