A defining feature of acute lung injury (ALI) is the increased lung vascular permeability and alveolar flooding, which leads to associated morbidity and mortality. Specific therapies to alleviate the unremitting vascular leak in ALI are not currently clinically available; however, our prior studies indicate a protective role for sphingosine-1-phosphate (S1P) in animal models of ALI with reductions in lung edema. As S1P levels are tightly regulated by synthesis and degradation, we tested the hypothesis that inhibition of S1P lyase (S1PL), the enzyme that irreversibly degrades S1P via cleavage, could ameliorate ALI. Intratracheal instillation of LPS to mice enhanced S1PL expression, decreased S1P levels in lung tissue, and induced lung inflammation and injury. LPS challenge of wild-type mice receiving 2-acetyl-4-[1(R),2(S),3(R),4-tetrahydroxybutyl]-imidazole to inhibit S1PL or S1PL^+/− mice resulted in increased S1P levels in lung tissue and bronchoalveolar lavage fluids and reduced lung injury and inflammation. Moreover, down-regulation of S1PL expression by short interfering RNA (siRNA) in primary human lung microvascular endothelial cells increased S1P levels, and attenuated LPS-mediated phosphorylation of p38 mitogen-activated protein kinase and I-κB, IL-6 secretion, and endothelial barrier disruption via Rac1 activation. These results identify a novel role for intracellularly generated S1P in protection against ALI and suggest S1PL as a potential therapeutic target.