Acyloxyacyl hydrolase (AOAH) is an unusual but highly conserved lipase, previously described only in myeloid cells, that removes secondary fatty acyl chains from bacterial lipopolysaccharides (LPS) and may also act on various glycero(phospho)lipids. Deacylation by AOAH greatly reduces the ability of LPS to stimulate cells via CD14-MD-2-Toll-like receptor 4. We report here that renal cortical tubule cells produce AOAH and secrete it into urine, where it can deacylate LPS. In vitro studies revealed that proximal tubule cells secrete pro-AOAH, which can be taken up by bladder cells and processed to the heterodimeric, more enzymatically active, mature form of AOAH. AOAH can then be used by the recipient cells to deacylate LPS. The enzyme produced by proximal tubule epithelium may thus be shared with downstream cells. In addition, mature AOAH is found in the urine. We suggest that cortical tubule cells may produce and secrete AOAH to limit inflammatory responses to gram-negative bacteria throughout the urinary tract.