LPS-activated neutrophils secrete IL-1β by activation of TLR-4. Based on studies in macrophages, it is likely that ROS and lysosomal destabilization regulated by Syk activation may also be involved. Since neutrophils have abundant expression of the ITIM-containing co-receptor CEACAM1 and Gram-negative bacteria such as Neisseria utilize CEACAM1 as a receptor that inhibits inflammation, we hypothesized that the overall production of IL-1β in LPS treated neutrophils may be negatively regulated by CEACAM1. We found that LPS treated neutrophils induced phosphorylation of Syk resulting in the formation of a complex including TLR4, p-Syk, and p-CEACAM1, which in turn, recruited the inhibitory phosphatase SHP-1. LPS treatment leads to ROS production, lysosomal damage, caspase-1 activation and IL-1β secretion in neutrophils. The absence of this regulation in Ceacam1^−/− neutrophils led to hyper production of IL-1β in response to LPS. The hyper production of IL-1β was abrogated by in vivo reconstitution of wild type but not ITIM-mutated CEACAM1 bone marrow stem cells. Blocking Syk activation by kinase inhibitors or RNAi reduced Syk phosphorylation, lysosomal destabilization, ROS production, and caspase-1 activation in Ceacam1^−/− neutrophils. We conclude that LPS treatment of neutrophils triggers formation of a complex of TLR4 with pSyk and pCEACAM1, which upon recruitment of SHP-1 to the ITIMs of pCEACAM1, inhibits IL-1β production by the inflammasome. Thus, CEACAM1 fine-tunes IL-1β production in LPS treated neutrophils, explaining why the additional utilization of CEACAM1 as a pathogen receptor would further inhibit inflammation.