Progranulin (PGRN) is a widely expressed, pleiotropic protein that is involved in diverse biological processes, including cellular proliferation, neuron development, and wound healing. However, the role of PGRN in the regulation of pathogen-induced systemic inflammation and the mechanisms involved have not been established. In this study, we show that PGRN-deficient mice display heightened mortality in models of polymicrobial sepsis and endotoxinemia, with increased tissue levels of inflammatory cytokines and reduced IL-10 production. Conversely, administration of rPGRN decreases the susceptibility of PGRN-deficient mice to LPS-induced endotoxemic shock and augments IL-10 production by LPS-activated macrophages in a TNFR-dependent manner. Molecular analysis reveals a direct role of the transcription factor C/EBPα in PGRN-regulated IL-10 expression. C/EBPα-deficient macrophages produce less IL-10 in response to LPS. Furthermore, mice deficient in C/EBPα in hematopoietic cells are highly vulnerable to LPS-induced septic shock. Lastly, the defective IL-10 production by PGRN-deficient cells is primarily due to reduced C/EBPα protein stability via the E3 ubiquitin–conjugating enzyme E6AP and proteasome-mediated degradation. To our knowledge, this study provides the first evidence that PGRN is a nonredundant regulator of systemic inflammation via modulating the levels and activity of C/EBPα, IL-10, and the ubiquitin–proteasome proteolysis pathway. The results bear strong and profound implications for PGRN insufficiency and its mutation-associated systemic and organ-specific inflammatory human diseases.