The polysaccharide capsule and pneumolysin toxin are major virulence factors of the human bacterial pathogen Streptococcus pneumoniae. Colonization of the nasopharynx is asymptomatic but invasion of the lungs can result in invasive pneumonia. Here we show that the capsule suppresses the release of the pro-inflammatory cytokines CXCL8 (IL-8) and IL-6 from the human pharyngeal epithelial cell line Detroit 562. Release of both cytokines was much less from human bronchial epithelial cells (iHBEC) but levels were also affected by capsule. Pneumolysin stimulates CXCL8 release from both cell lines. Suppression of CXCL8 homologue (CXCL2/MIP-2) release by the capsule was also observed in vivo during intranasal colonization of mice but was only discernable in the absence of pneumolysin. When pneumococci were administered intranasally to mice in a model of long term, stable nasopharyngeal carriage, encapsulated S. pneumoniae remained in the nasopharynx whereas the nonencapsulated pneumococci disseminated into the lungs. Pneumococcal capsule plays a role not only in protection from phagocytosis but also in modulation of the pro-inflammatory immune response in the respiratory tract.