Neoandrographolide, one of the principal diterpene lactones, isolated from a medicinal herb Andrographis paniculata Nees, was tested in vivo and in vitro for its anti-inflammatory activities and mechanism. Oral administration of neoandrographolide (150 mg/kg) significantly suppressed ear edema induced by dimethyl benzene in mice. Oral administration of neoandrographolide (100-150 mg/kg) also reduced the increase in vascular permeability induced by acetic acid in mice. In vitro studies were performed using the macrophage cell line RAW264.7 to study the effect of neoandrographolide on suppressing phorbol-12-myristate-13-acetate (PMA)-stimulated respiratory bursts and lipopolysaccharide (LPS)-induced production of nitric oxide (NO) and tumor necrosis factor-alpha (TNF-alpha). Respiratory bursts were quantified by chemiluminescence (CL) measurements. Results showed that neoandrographolide suppressed PMA-stimulated respiratory bursts dose-dependently from 30 muM to 150 muM. Neoandrographolide also inhibited NO and TNF-alpha production in LPS-induced macrophages, contributing to the anti-inflammatory activity of A. paniculata. These results indicate that neoandrographolide possesses significant anti-inflammatory effects, which implies that it would be one of the major contributing components to participate in the anti-inflammatory effect of A. paniculata. and a potential candidate for further clinical trial.