Stimulation with LPS induces tyrosine phosphorylation of numerous proteins involved in the TLR signaling pathway. In this study, we demonstrated that myeloid differentiation factor-2 (MD-2) is also tyrosine phosphorylated following LPS stimulation. LPS-induced tyrosine phosphorylation of MD-2 is specific; it is blocked by the tyrosine kinase inhibitor, herbimycin A, as well as by an inhibitor of endocytosis, cytochalasin D, suggesting that MD-2 phosphorylation occurs during trafficking of MD-2 and not on the cell surface. Furthermore, we identified two possible phospho-accepting tyrosine residues at positions 22 and 131. Mutant proteins in which these tyrosines were changed to phenylalanine had reduced phosphorylation and significantly diminished ability to activate NF-κB in response to LPS. In addition, MD-2 coprecipitated and colocalized with Lyn kinase, most likely in the endoplasmic reticulum. A Lyn-binding peptide inhibitor abolished MD-2 tyrosine phosphorylation, suggesting that Lyn is a likely candidate to be the kinase required for MD-2 tyrosine phosphorylation. Our study demonstrated that tyrosine phosphorylation of MD-2 is important for signaling following exposure to LPS and underscores the importance of this event in mediating an efficient and prompt immune response.