Phospho-ceramide analog-1 (PCERA-1) has been described as a potent in vivo suppressor of the pro-inflammatory cytokine tumor necrosis factor alpha (TNFalpha), and thus as a putative drug for the treatment of inflammatory diseases. However, the in vivo cell target of PCERA-1 has not been identified, and its in vivo effect on secretion of other relevant cytokines has not been reported. We have previously shown that PCERA-1 suppresses lipopolysaccharide (LPS)-induced TNFalpha production in RAW264.7 macrophages in vitro. We therefore hypothesized that PCERA-1 targets TNFalpha production by primary macrophages. In this study we thus investigated the effect of PCERA-1 on LPS-induced release of TNFalpha, interleukin (IL)-10 and IL-12p40, in vivo, and ex vivo. We found that PCERA-1 suppressed production of the pro-inflammatory cytokines, TNFalpha and IL-12p40, and increased production of the anti-inflammatory cytokine, IL-10, in LPS-challenged mice, and in primary peritoneal macrophages as well as bone marrow-derived macrophages (BMDM) stimulated with LPS and interferon (IFN)-gamma. These activities of PCERA-1 were independent of each other. In contrast, PCREA-1 only slightly affected TNFalpha production in the whole blood assay, where LPS-induced cytokines are mainly produced by monocytes. Moreover, isolated blood monocytes were inert to PCERA-1, but acquired responsiveness to PCERA-1 upon macrophage colony stimulating factor (M-CSF)-induced differentiation into macrophages. Pharmacokinetic analysis in mice showed that while the volume of distribution of PCERA-1 is low, the drug was rapidly exchanged between the peritoneum and the systemic circulation. Together, these results suggest that sensitivity to PCERA-1 increases upon differentiation of blood monocytes into tissue macrophages, and imply a mechanistic role for peritoneal macrophages in the in vivo anti-inflammatory activity of PCERA-1. Finally, we show that the mechanism of activity of PCERA-1 and prostaglandin E2 (PGE2) is distinct, and that PCERA-1 signaling is not mediated by EP2, a PGE2 receptor which is also activated by oxidized phospholipids. The independent and reciprocal modulation of production of TNFalpha and IL-12p40, vs. IL-10, suggests that PCERA-1 may be a candidate drug for the treatment of inflammation-linked diseases.