Disease tolerance is the ability of the host to reduce the effect of infection on host fitness. Analysis of disease tolerance pathways could provide new approaches for treating infections and other inflammatory diseases. Typically, an initial exposure to bacterial lipopolysaccharide (LPS) induces a state of refractoriness to further LPS challenge (endotoxin tolerance). We found that a first exposure of mice to LPS activated the ligand-operated transcription factor aryl hydrocarbon receptor (AhR) and the hepatic enzyme tryptophan 2,3-dioxygenase, which provided an activating ligand to the former, to downregulate early inflammatory gene expression. However, on LPS rechallenge, AhR engaged in long-term regulation of systemic inflammation only in the presence of indoleamine 2,3-dioxygenase 1 (IDO1). AhR-complex-associated Src kinase activity promoted IDO1 phosphorylation and signalling ability. The resulting endotoxin-tolerant state was found to protect mice against immunopathology in Gram-negative and Gram-positive infections, pointing to a role for AhR in contributing to host fitness.