Transmembrane protein 16A (TMEM16A) is one of the members of the ten-member family of “transmembrane protein 16”, playing critical roles in infection and solid organ injury. Acute lung injury (ALI) is a devastating disease which could be triggered by sepsis, trauma, and ischemia reperfusion. However, molecular mechanisms contributing to ALI are poorly understood at presently. In this study, we investigated the role of TMEM16A in sepsis-induced ALI using TMEM16A-deficient mice. Sepsis-induced ALI model was established by intratracheal injection of lipopolysaccharide (LPS). Our results showed that LPS stimulation significantly upregulated the expression levels of TMEM16A in lung tissues and in alveolar epithelial type II (AT2) cells. Knockout of TMEM16A in AT2 cells significantly improved pulmonary function and alleviated lung pathological injury in LPS-treated mice. Meanwhile, TMEM16A deficiency also inhibited endoplasmic reticulum (ER) stress and ferroptosis in AT2 cells from LPS-treated mice. In vitro experiments further demonstrated that ER stress and ferroptosis were inhibited after TMEM16A was knocked out. Furthermore, we used ER stress inducer thapsigargin to induce ER stress in TMEM16A-null AT2 cells and found that the induction of ER stress abolished the inhibition of ferroptosis by TMEM16A deficiency in LPS-treated AT2 cells. Finally, we disclosed that pharmacological inhibition of TMEM16A by shikonin also showed similar therapeutic effect on LPS-induced ALI in vivo. In conclusion, TMEM16A deficiency in AT2 cells could alleviate sepsis-induced ALI by decreasing ER stress-induced ferroptosis during ALI.