ABSTRACT: Background: Occludin is a key tight junction protein that contributes to epithelial barrier integrity and inflammatory regulation. Although its structural roles are well characterized, the physiological relevance of its C-terminal domain in airway inflammation remains poorly defined. Methods: Occludin expression in human lung disease tissues was examined by immunohistochemistry. Functional relevance was assessed using BEAS-2B cells overexpressing full-length occludin or C-terminal deletion mutants. A synthetic peptide derived from the occludin C-terminal core sequence was designed and evaluated for its anti-inflammatory and barrier-protective effects. In vitro assays included IL-8 secretion, transepithelial electrical resistance, cytoskeletal remodeling, mitochondrial function, ROS production, and transcriptomic profiling. Therapeutic efficacy was validated in a murine model of Pseudomonas aeruginosa LPS–induced airway inflammation, followed by cytokine analysis, histopathology, and immune profiling. Results: Occludin expression was markedly reduced in inflamed human lung tissues. In BEAS-2B cells, occludin overexpression suppressed LPS-induced IL-8 release, restored barrier integrity, and reduced F-actin remodeling, whereas C-terminal deletion abolished these effects. The C-terminal occludin peptide significantly decreased IL-8 production, improved barrier function, and suppressed cytoskeletal changes, while a mutant peptide was ineffective. Transcriptomic analyses identified occludin as a central suppressor of inflammatory signaling. Mechanistically, the peptide inhibited p38 activation, preserved mitochondrial structure, and reduced ROS production. In vivo, peptide pretreatment improved survival, lowered IL-6, IL-8, and TNF-α levels, and reduced goblet cell hyperplasia and inflammatory infiltration. Immune profiling further revealed restored T-cell populations, reduced myeloid expansion, and enhanced M2 macrophage polarization. Conclusion: The occludin C-terminal–derived peptide exerts robust anti-inflammatory and barrier-protective effects, representing a promising therapeutic candidate for LPS-induced and potentially broader inflammatory lung diseases.