Identifying points of control in inflammation is essential to discovering safe and effective antiinflammatory medicines. Palmitoylethanolamide (PEA) is a naturally occurring lipid amide that, when administered as a drug, inhibits inflammatory responses by engaging peroxisome proliferator-activated receptor-alpha (PPAR-alpha). PEA is preferentially hydrolyzed by the cysteine amidase N-acylethanolamine-hydrolyzing acid amidase (NAAA), which is highly expressed in macrophages. Here we report the discovery of a potent and selective NAAA inhibitor, N-[(3S)-2-oxo-3-oxetanyl]-3-phenylpropanamide [(S)-OOPP], and show that this inhibitor increases PEA levels in activated leukocytes and blunts responses induced by inflammatory stimuli both in vitro and in vivo. These effects are stereoselective, mimicked by exogenous PEA, and abolished by PPAR-alpha deletion. (S)-OOPP also attenuates inflammation and tissue damage and improves recovery of motor function in mice subjected to spinal cord trauma. The results suggest that PEA activation of PPAR-alpha in leukocytes serves as an early stop signal that contrasts the progress of inflammation. The PEA-hydrolyzing amidase NAAA may provide a previously undescribed target for antiinflammatory medicines.