HIV-1 uses a number of means to manipulate the immune system, to avoid recognition and to highjack signaling pathways. HIV-1 infected cells show limited Toll-Like Receptor (TLR) responsiveness via as yet unknown mechanisms. Using biochemical and biophysical approaches, we demonstrate that the trans-membrane domain (TMD) of the HIV-1 envelope (ENV) directly interacts with TLR2 TMD within the membrane milieu. This interaction attenuates TNFα, IL-6 and MCP-1 secretion in macrophages, induced by natural ligands of TLR2 both in in vitro and in vivo models. This was associated with decreased levels of ERK phosphorylation. Furthermore, mutagenesis demonstrated the importance of a conserved GxxxG motif in driving this interaction within the membrane milieu. The administration of the ENV TMD in vivo to lipotechoic acid (LTA)/Galactosamine-mediated septic mice resulted in a significant decrease in mortality and in tissue damage, due to the weakening of systemic macrophage activation. Our findings suggest that the TMD of ENV is involved in modulation of the innate immune response during HIV infection. Furthermore, due to the high functional homology of viral ENV proteins this function may be a general character of viral-induced immune modulation.