The role of Endoplasmic Reticulum Chaperone and Signaling Regulator BiP/GRP78 in acute inflammatory injury, particularly in the context of lung endothelium, is poorly defined. In his study, we monitored the effect of SubAB, a holoenzyme that cleaves and specifically inactivates BiP/GRP78 and its inactive mutant SubA_A272B on lung inflammatory injury in an aerosolized LPS inhalation mouse model of acute lung injury (ALI). Analysis of lung homogenates and bronchoalveolar lavage (BAL) fluid showed that LPS-induced lung inflammation and injury were significantly inhibited in SubAB- but not in SubA_A272B-treated mice. SubAB-treated mice were also protected from LPS-induced decrease in lung compliance. Gene transfer of dominant negative mutant of BiP in the lung endothelium protected against LPS-induced lung inflammatory responses. Consistent with this, stimulation of endothelial cells (EC) with thrombin caused an increase in BiP/GRP78 levels and inhibition of ER stress with 4-phenylbutyric acid (4-PBA) prevented this response as well as increase in VCAM-1, ICAM-1, IL-6, and IL-8 levels. Importantly, thrombin-induced Ca²⁺ signaling and EC permeability were also prevented upon BiP/GRP78 inactivation. The above EC responses are mediated by intracellular BiP/GRP78 and not by cell surface BiP/GRP78. Together, these data identify intracellular BiP/GRP78 as a novel regulator of endothelial dysfunction associated with ALI.