In the mouse lung, Escherichia coli LPS can decrease surfactant protein-B (SFTPB) mRNA and protein concentrations. LPS also regulates the expression, synthesis, and concentrations of a variety of gene and metabolic products that inhibit SFTPB gene expression. The purpose of the present study was to determine whether LPS acts directly or indirectly on pulmonary epithelial cells to trigger signaling pathways that inhibit SFTPB expression, and whether the transcription factor CCAAT/enhancer binding protein (C/EBP)-β (CEBPB) is a downstream inhibitory effector. To investigate the mechanism of SFTPB repression, the human pulmonary epithelial cell lines NCI-H441 (H441) and NCI-H820 (H820) and the mouse macrophage-like cell line RAW264.7 were treated with LPS. Whereas LPS did not decrease SFTPB transcripts in H441 or H820 cells, the conditioned medium of LPS-treated RAW264.7 cells decreased SFTPB transcripts in H441 and H820 cells, and inhibited SFTPB promoter activity in H441 cells. In the presence of neutralizing anti-tumor necrosis factor (TNF) antibodies, the conditioned medium of LPS-treated RAW264.7 cells did not inhibit SFTPB promoter activity. In H441 cells treated with recombinant TNF protein, SFTPB transcripts decreased, whereas CEBPB transcripts increased and the transient coexpression of CEBPB decreased SFTPB promoter activity. Further, CEBPB short, interfering RNA increased basal SFTPB transcripts and countered the decrease of SFTPB transcripts by TNF. Together, these findings suggest that macrophages participate in the repression of SFTPB expression by LPS, and that macrophage-released cytokines (including TNF) regulate the transcription factor CEBPB, which can function as a downstream transcriptional repressor of SFTPB gene expression in pulmonary epithelial cells.