We investigated the effect of activated protein C (APC) on pulmonary vascular injury and the increase in tumor necrosis factor (TNF) levels in lipopolysaccharide (LPS)-treated rats to determine whether APC reduces LPS-induced endothelial damage by inhibiting cytokine production. Intravenously administered LPS (5 mg/kg) induced pulmonary vascular injury, as indicated by an increase in the lung wet-to-dry weight ratio. LPS-induced pulmonary vascular injury was prevented by APC but not by active site-blocked factor Xa [dansyl glutamyl-glycyl-arginyl chloromethyl detone-treated activated factor X (DEGR-Xa)], a selective inhibitor of thrombin generation, or inactivated APC [diisopropyl fluorophosphate-treated APC (DIP-APC)]. APC, but not DEGR-Xa or DIP-APC, significantly inhibited the LPS-induced increase in the plasma level of TNF. APC significantly inhibited the production of TNF by LPS-stimulated monocytes in a dose-dependent fashion in vitro, but DIP-APC did not. APC did not inhibit the functions of activated neutrophils in vitro. These findings suggest that APC prevented LPS-induced pulmonary vascular injury by inhibiting TNF production by monocytes and not via its anticoagulant activity. The serine protease activity of APC appears to be essential for inhibition of TNF production.