Phospholipase C epsilon (PLC) is a unique PLC isoform that can be regulated by multiple signaling inputs from both Ras family GTPases and heterotrimeric G proteins and has primary sites of expression in the heart and lung. While the role of PLC in cardiac function and pathology has been documented, its relevance in acute lung injury (ALI) is unclear. We used PLC-/- mice to address the role of PLC in regulating lung vascular inflammation and injury in an aerosolized bacterial LPS inhalation mouse model of ALI. PLC-/- mice showed a marked decrease in LPS-induced proinflammatory mediators (ICAM-1, VCAM-1, TNFα, IL-1β, IL-6, MIP2, KC, MCP-1, and GM-CSF), lung PMN infiltration and microvascular leakage and loss of VE-cadherin compared to PLC+/+ mice. These data identify PLC as a critical determinant of proinflammatory and leaky phenotype of the lung. To test the possibility that PLC activity in endothelial cells (EC) could contribute in ALI, we determined its role in EC inflammation and barrier disruption. RNAi knockdown of PLC inhibited NF-B activity in response to diverse proinflammatory stimuli, thrombin, LPS, TNFα as well as the non-receptor agonist PMA in EC. Depletion of PLC also inhibited thrombin-induced expression of NF-B target gene, VCAM-1. Importantly, PLC knockdown also protected against thrombin-induced EC barrier disruption by inhibiting the loss of VE-cadherin at adherens junctions and formation of actin stress fibers. These data identify PLC as a novel regulator of EC inflammation and permeability, and show a hitherto unknown role of PLC in the pathogenesis of ALI.