Anti-inflammatory and vascular protective actions of adiponectin are well recognized. However, many fundamental questions remain unanswered. The current study attempted to identify the adiponectin receptor subtype responsible for adiponectin's vascular protective action and investigate the role of ceramidase activation in adiponectin anti-inflammatory signaling. Adiponectin significantly reduced tumor necrosis factor (TNF)α-induced intercellular adhesion molecule-1 expression and attenuated TNFα-induced oxidative/nitrative stress in human umbilical vein endothelial cells. These anti-inflammatory actions were virtually abolished by adiponectin receptor 1 (AdipoR1-), but not AdipoR2-, knockdown (KD). Treatment with adiponectin significantly increased neutral ceramidase (nCDase) activity (3.7-fold; P<0.01). AdipoR1-KD markedly reduced globular adiponectin-induced nCDase activation, whereas AdipoR2-KD only slightly reduced. More importantly, small interfering RNA-mediated nCDase-KD markedly blocked the effect of adiponectin on TNFα-induced intercellular adhesion molecule-1 expression. AMP-activated protein kinase-KD failed to block adiponectin-induced nCDase activation and modestly inhibited adiponectin anti-inflammatory effect. In contrast, in caveolin-1 KD (Cav1-KD) cells, >87% of adiponectin-induced nCDase activation was lost. Whereas adiponectin treatment failed to inhibit TNFα-induced intercellular adhesion molecule-1 expression, treatment with sphingosine-1-phosphate or SEW (sphingosine-1-phosphate receptor agonist) remained effective in Cav1-KD cells. AdipoR1 and Cav1 colocalized and coprecipitated in human umbilical vein endothelial cells. Adiponectin treatment did not affect this interaction. There is weak basal Cav1/nCDase interaction, which significantly increased after adiponectin treatment. Knockout of AdipoR1 or Cav1 abolished the inhibitory effect of adiponectin on leukocyte rolling and adhesion in vivo. These results demonstrate for the first time that adiponectin inhibits TNFα-induced inflammatory response via Cav1-mediated ceramidase recruitment and activation in an AdipoR1-dependent fashion.