The endogenous lipid amides, palmitoylethanolamide (PEA) and oleoylethanolamide (OEA), exert marked antinociceptive and anti-inflammatory effects in animal models by engaging nuclear peroxisome proliferator-activated receptor-α. PEA and OEA are produced by macrophages and other host-defense cells and are deactivated by the cysteine amidase, N-acylethanolamine acid amidase (NAAA), which is highly expressed in macrophages and B-lymphocytes. In the present study, we examined whether a) NAAA might be involved in the inflammatory reaction triggered by injection of complete Freund's adjuvant (CFA) into the rat paw and b) administration of 4-cyclohexylbutyl-N-[(S)-2-oxoazetidin-3-yl]-carbamate (ARN726), a novel systemically active NAAA inhibitor, attenuates such reaction. Injection of CFA into the paw produced local edema and heat hyperalgesia, which were accompanied by decreased PEA and OEA content (assessed by liquid chromatography/mass spectrometry) and increased NAAA levels (assessed by Western blot and ex vivo enzyme activity measurements) in paw tissue. Administration of undec-10-ynyl-N-[(3S)-2-oxoazetidin-3-yl] carbamate (ARN14686), a NAAA-preferring activity-based probe, revealed that NAAA was catalytically active in CFA-treated paws. Administration of ARN726 reduced NAAA activity and restored PEA and OEA levels in inflamed tissues, and significantly decreased CFA-induced inflammatory symptoms, including pus production and myeloperoxidase activity. The results confirm the usefulness of ARN726 as a probe to investigate the functions of NAAA in health and disease and suggest that this enzyme may provide a new molecular target for the treatment of arthritis.