The aerial parts of Lychnophora trichocarpha Spreng. (Asteraceae) are used macerated in water or ethanol to treat inflammation, pain, rheumatism, contusions, bruises and insect bites in Brazilian traditional medicine. In this study, anti-inflammatory activity of ethanol extract from aerial parts of L. trichocarpha and its ethyl acetate fraction was investigated. Sesquiterpene lactones, lychnopholide (Lyc) and eremantholide C (EreC), isolated of ethyl acetate fraction, were also assayed for in vitro and in vivo anti-inflammatory activity. Topical treatment with ointments containing ethanol extract, its ethyl acetate fraction and sesquiterpene lactones significantly reduced carrageenan-induced mice paw oedema. In vitro assays demonstrated that Lyc inhibited interferon -γ/lipopolysaccharide -stimulated nitric oxide (NO) production in J774A.1 macrophages and increased production of IL-10 anti-inflammatory cytokine. The reduction of tumor necrosis factor-α (TNF-α) production by EreC was accompanied by an increased production of IL-10 in a concentration-dependent manner in J774A.1 macrophages. The anti-inflammatory effect of Lyc seems to involve the inhibition of production of NO and increased production of IL-10. The mechanism of the effect of EreC on the reduction of carrageenan-induced paw oedema may be attributed to inhibition of production of TNF-α and stimulation of IL-10 production. The results corroborate the use of ethanol extract from Lychnophora trichocarpha in folk medicine for anti-inflammatory action and indicate that the topical route is suitable for use.