Adiponectin is an adipokine with potent anti-inflammatory properties. However, the mechanisms by which adiponectin suppresses macrophage function are not well understood. Treatment of RAW264.7 macrophages with adiponectin for 18 h decreased lipopolysaccharide (LPS)-stimulated tumor necrosis factor-alpha (TNF-alpha) production. Here we demonstrate that globular adiponectin (gAcrp) initially increased TNF-alpha expression in RAW264.7 macrophages; this TNF-alpha then contributed to increased expression of interleukin-10, which in turn was required for the development of tolerance to subsequent LPS exposure. gAcrp-mediated increases in TNF-alpha mRNA accumulation were associated with increased TNF-alpha promoter activity. gAcrp increased the DNA binding activity of both Egr-1 and NFkappaB; mutation of either the Egr-1 or NFkappaB binding sites in the TNF-alpha promoter decreased gAcrp-stimulated promoter activity. Further, co-transfection with either dominant negative Egr-1 or the IkappaB super-repressor prevented gAcrp-stimulated TNF-alpha promoter activity. gAcrp also increased Egr-1 promoter activity, mRNA accumulation, and DNA binding activity. Inhibition of ERK1/2 with U0126 potently suppressed gAcrp-stimulated Egr-1 promoter activity, as well as TNF-alpha promoter activity. In summary, these data demonstrate that adiponectin initially increases TNF-alpha production by macrophages via ERK1/2-->Egr-1 and NFkappaB-dependent mechanisms; these increases in TNF-alpha in turn lead to increased expression of interleukin-10 and an eventual dampening of LPS-mediated cytokine production in macrophages.