The expression of toll-like receptor (TLR)-9, a pathogen recognition receptor that recognizes unmethylated CpG sequences in microbial DNA molecules, is linked to the pathogenesis of several lung diseases. TLR9 expression and signaling was investigated in animal and cell models of chronic obstructive pulmonary disease (COPD). Here we observed enhanced TLR9 expression in mouse lungs following exposure to cigarette smoke. Tlr9-/- mice were resistant to cigarette smoke-induced loss of lung function; determined by mean linear intercept, total lung capacity, lung compliance and tissue elastance analysis. Tlr9 expression also regulated smoke-mediated immune cell recruitment to the lung, apoptosis, G-CSF, CXCL5 and MMP-2 expression and protein tyrosine phosphatase 1B (PTP1B) activity in the lung. PTP1B, a phosphatase with anti-inflammatory abilities, was identified to bind to TLR9. In vivo delivery of a TLR9 agonist enhanced TLR9 binding to PTP1B, which inactivated PTP1B. Ptp1b-/- mice had elevated lung concentrations of G-CSF, CXCL5 and MMP-2 and tissue expression of type-1 interferon following TLR9 agonist administration, compared to wild type mice. TLR9 responses were further determined in fully differentiated normal human bronchial epithelial (NHBE) cells isolated from non-smoker, smoker and COPD donors and then cultured at air liquid interface. NHBE cells from smokers and COPD patients expressed more TLR9 and secreted greater levels of G-CSF, IL-6, CXCL5, IL-1β and MMP-2 upon TLR9 ligand stimulation compared to cells from non-smoker donors. Though TLR9 combats infection, our results indicate that TLR9 induction can impact on lung function by inactivating PTP1B and up regulating expression of pro inflammatory cytokines.