Background Airborne microbial products have been reported to promote immune responses that suppress asthma, yet how these beneficial effects take place remains controversial and poorly understood. Methods We exposed mice to the bacterium Escherichia coli and subsequently induced allergic airway inflammation through sensitization and intranasal challenge with ovalbumin. Results Pulmonary exposure to the bacterium Escherichia coli leads to a suppression of allergic airway inflammation. This immune modulation was neither mediated by the induction of a T helper 1 (Th1) response nor regulatory T cells; however, it was dependent on Toll-like receptor 4 (TLR4) but did not involve TLR desensitisation. Dendritic cell migration to the draining lymph nodes and activation of T cells was unaffected by prior exposure to E.coli, while dendritic cells in the lung displayed a less activated phenotype and had impaired antigen presentation capacity. Consequently, in situ Th2 cytokine production was abrogated. The suppression of airway hyper-responsiveness was mediated through the recruitment of gd T cells; however, the suppression of dendritic cells and T cells was mediated through a distinct mechanism that could not be overcome by the local administration of activated dendritic cells, or by the in vivo administration of tumour necrosis factor a. Conclusion Our data reveal a localized immunoregulatory pathway that acts to protect the airways from allergic inflammation.