The pathogenesis of microbial infections and sepsis is partly attributable to dysregulated innate immune responses propagated by late-acting proinflammatory mediators such as procathepsin L (pCTS-L). It was previously not known whether any natural product could inhibit pCTS-L-mediated inflammation or could be strategically developed into a potential sepsis therapy. Here, we report that systemic screening of a NatProduct Collection of 800 natural products led to the identification of a lipophilic sterol, lanosterol (LAN), as a selective inhibitor of pCTS-L-induced production of cytokines [e.g., Tumor Necrosis Factor (TNF) and Interleukin-6 (IL-6)] and chemokines [e.g., Monocyte Chemoattractant Protein-1 (MCP-1) and Epithelial Neutrophil-Activating Peptide (ENA-78)] in innate immune cells. To improve its bioavailability, we generated LAN-carrying liposome nanoparticles and found that these LAN-containing liposomes (LAN-L) similarly inhibited pCTS-L-induced production of several chemokines [e.g., MCP-1, Regulated upon Activation, Normal T Cell Expressed and Presumably Secreted (RANTES) and Macrophage Inflammatory Protein-2 (MIP-2)] in human blood mononuclear cells (PBMCs). In vivo, these LAN-carrying liposomes effectively rescued mice from lethal sepsis even when the first dose was given at 24 h post the onset of this disease. This protection was associated with a significant attenuation of sepsis-induced tissue injury and systemic accumulation of serval surrogate biomarkers [e.g., IL-6, Keratinocyte-derived Chemokine (KC), and Soluble Tumor Necrosis Factor Receptor I (sTNFRI)]. These findings support an exciting possibility to develop liposome nanoparticles carrying anti-inflammatory sterols as potential therapies for human sepsis and other inflammatory diseases.