The NAD+-dependent 15-hydroxyprostaglandin dehydrogenase (15-PGDH) catalyzes the oxidation of the 15(S)-hydroxyl group of prostaglandin E2 (PGE2), converting the pro-inflammatory PGE2 to the anti-inflammatory 15-keto-PGE2 (an endogenous ligand for peroxisome proliferator-activated receptor-gamma [PPAR-γ]). To evaluate the significance of 15-PGDH/15-keto-PGE2 cascade in liver inflammation and tissue injury, we generated transgenic mice with targeted expression of 15-PGDH in the liver (15-PGDH Tg) and the animals were subjected to lipopolysaccharide (LPS)/Galactosamine (GalN)-induced acute liver inflammation and injury. Compared to the wild type mice, the 15-PGDH Tg mice showed lower levels of alanine aminotransferase (ALT) and aspartate aminotransferase (AST), less liver tissue damage, less hepatic apoptosis/necrosis, less macrophage activation, and lower inflammatory cytokine production. In cultured Kupffer cells, treatment with 15-keto-PGE2 or the conditioned medium (CM) from 15-PGDH Tg hepatocyes inhibited LPS-induced cytokine production, in vitro. Both 15-keto-PGE2 and the CM from15-PGDH Tg hepatocyes also up-regulated the expression of PPAR-γ downstream genes in Kupffer cells. In cultured hepatocytes, 15-keto-PGE2 treatment or 15-PGDH overexpression did not influence TNF-α-induced hepatocyte apoptosis. These findings suggest that 15-PGDH protects against LPS/GalN-induced liver injury and the effect is mediated via 15-keto-PGE2, which activates PPAR-γ in Kupffer cells and thus inhibits their ability to produce inflammatory cytokines. Accordingly, we observed that the PPAR-γ antagonist, GW9662, reversed the effect of 15-keto-PGE2 in Kupffer cell in vitro and restored the susceptibility of 15-PGDH Tg mice to LPS/GalN-induced acute liver injury in vivo. Collectively, our findings suggest that 15-PGDH-derived 15-keto-PGE2 from hepatocytes is able to activate PPAR-γ and inhibit inflammatory cytokine production in Kupffer cells and that this paracrine mechanism negatively regulates LPS-induced necro-inflammatory response in the liver. Therefore, induction of 15-PGDH expression or utilization of 15-keto-PGE2 analogue may have therapeutic benefits for the treatment of endotoxin-associated liver inflammation/injury.