The function of interleukin 37 (IL-37; formerly IL-1 family member 7) has remained elusive. Expression of IL-37 in macrophages or epithelial cells almost completely suppressed production of pro-inflammatory cytokines, whereas the abundance of these cytokines increased with silencing of endogenous IL-37 in human blood cells. Anti-inflammatory cytokines were unaffected. Mice with transgenic expression of IL-37 were protected from lipopolysaccharide-induced shock, and showed markedly improved lung and kidney function and reduced liver damage after treatment with lipopolysaccharide. Transgenic mice had lower concentrations of circulating and tissue cytokines (72–95% less) than wild-type mice and showed less dendritic cell activation. IL-37 interacted intracellularly with Smad3 and IL-37-expressing cells and transgenic mice showed less cytokine suppression when endogenous Smad3 was depleted. IL-37 thus emerges as a natural suppressor of innate inflammatory and immune responses.