Background Chronic granulomatous disease (CGD), an inherited disorder of the NADPH oxidase in which phagocytes are defective in generating superoxide anion and downstream reactive oxidant intermediates (ROIs), is characterized by recurrent bacterial and fungal infections and by excessive inflammation (e.g., inflammatory bowel disease). The mechanisms by which NADPH oxidase regulates inflammation are not well understood. Methodology/Principal Findings We found that NADPH oxidase restrains inflammation by modulating redox-sensitive innate immune pathways. When challenged with either intratracheal zymosan or LPS, NADPH oxidase-deficient p47phox−/− mice and gp91phox-deficient mice developed exaggerated and progressive lung inflammation, augmented NF-κB activation, and elevated downstream pro-inflammatory cytokines (TNF-α, IL-17, and G-CSF) compared to wildtype mice. Replacement of functional NADPH oxidase in bone marrow-derived cells restored the normal lung inflammatory response. Studies in vivo and in isolated macrophages demonstrated that in the absence of functional NADPH oxidase, zymosan failed to activate Nrf2, a key redox-sensitive anti-inflammatory regulator. The triterpenoid, CDDO-Im, activated Nrf2 independently of NADPH oxidase and reduced zymosan-induced lung inflammation in CGD mice. Consistent with these findings, zymosan-treated peripheral blood mononuclear cells from X-linked CGD patients showed impaired Nrf2 activity and increased NF-κB activation. Conclusions/Significance These studies support a model in which NADPH oxidase-dependent, redox-mediated signaling is critical for termination of lung inflammation and suggest new potential therapeutic targets for CGD.