Gram-negative bacterial sepsis commonly causes organ dysfunction and death in humans. Although circulating bacterial toxins trigger inflammation in sepsis, little is known about the composition of bacterial products released into the blood during sepsis or the contribution of various bacterial components to the pathogenesis of sepsis. We have shown that diverse Gram-negative bacteria release bacterial peptidoglycan-associated lipoprotein (PAL) into serum. The present studies explored release of PAL into the blood during sepsis and tested the hypothesis that PAL contributes to bacterial virulence and inflammation in Gram-negative sepsis. Released PAL was detected in the blood of 94% of mice following cecal ligation and puncture. Picomolar to nanomolar levels of PAL stimulated macrophages and splenocytes from lipopolysaccharide-hyporesponsive (C3H/HeJ) mice. Injection of PAL into C3H/HeJ mice stimulated production of serum cytokines and increased pulmonary and myocardial expression of inflammatory markers. PAL caused death in sensitized C3H/HeJ mice. Mutant Escherichia coli bacteria with reduced levels of PAL or truncated PAL were less virulent than wild-type bacteria, as indicated by higher survival rates and lower circulating levels of interleukin 6 and bacteria in a model of peritonitis in lipopolysaccharide-responsive mice. The studies suggest that PAL may be an important bacterial mediator of Gram-negative sepsis.