Antibiotics-induced release of the pore-forming virulence factor pneumolysin (PLY) in patients with pneumococcal pneumonia results in its presence days after lungs are sterile and is a major factor responsible for the induction of permeability edema. Here we sought to identify major mechanisms mediating PLY-induced endothelial dysfunction. We evaluated PLY-induced endothelial hyperpermeability in human lung microvascular endothelial cells (HL-MVECs) and human lung pulmonary artery endothelial cells in vitro and in mice instilled intratracheally with PLY. PLY increases permeability in endothelial monolayers by reducing stable and dynamic microtubule content and modulating VE-cadherin expression. These events, dependent upon an increased calcium influx, are preceded by protein kinase C (PKC)-α activation, perturbation of the RhoA/Rac1 balance, and an increase in myosin light chain phosphorylation. At later time points, PLY treatment increases the expression and activity of arginase in HL-MVECs. Arginase inhibition abrogates and suppresses PLY-induced endothelial barrier dysfunction by restoring NO generation. Consequently, a specific PKC-α inhibitor and the TNF-derived tonoplast intrinsic protein peptide, which blunts PLY-induced PKC-α activation, are able to prevent activation of arginase in HL-MVECs and to reduce PLY-induced endothelial hyperpermeability in mice. Arginase I (AI)(+/-)/arginase II (AII)(-/-) C57BL/6 mice, displaying a significantly reduced arginase I expression in the lungs, are significantly less sensitive to PLY-induced capillary leak than their wild-type or AI(+/+)/AII(-/-) counterparts, indicating an important role for arginase I in PLY-induced endothelial hyperpermeability. These results identify PKC-α and arginase I as potential upstream and downstream therapeutic targets in PLY-induced pulmonary endothelial dysfunction.