Canarium lyi C.D. Dai & Yakovlev (CL) is a member of the Anacardiaceae family. To the best of our knowledge, no studies on its anti-inflammatory effects have yet been reported. In the present study, we investigated the protective effects of CL on inflammation in lipopolysaccharide (LPS)-stimulated RAW 264.7 cells and LPS-induced acute lung injury (ALI) mice. CL attenuated the production of LPS-stimulated inflammatory mediators such as tumor necrosis factor-α (TNF-α), interleukin (IL)-1β, and interleukin-6 (IL-6). Furthermore, CL suppressed phosphorylation of the inhibitor κB-α (IκB-α), p38, c-Jun terminal kinase (JNK) and extracellular signal-regulated kinase (ERK), as well as the translocation of the nuclear factor-κB (NF-κB) p65 subunit into the nucleus. For the in vivo efficacy, the effect of CL on a mouse model of LPS-induced acute lung injury was assessed. CL treatment of the mice significantly inhibited the inflammatory cell recruitment and pro-inflammatory cytokine production in bronchoalveolar lavage fluids (BALF). CL-treated mice also showed a marked inhibition of cyclooxygenase-2 (COX-2) and phosphorylation of IκB and p65. In addition, CL attenuated lung histopathological changes in LPS-induced ALI mice. In conclusion, our results suggest that CL is a potential therapeutic candidate for the treatment of inflammatory diseases, including pneumonia.