The zebrafish (Danio rerio) is a powerful model organism for studies of the innate immune system. One apparent difference between human and zebrafish innate immunity is the cellular machinery for LPS-sensing. In amniotes, the protein complex formed by Toll-like receptor 4 and myeloid differentiation factor 2 (Tlr4/Md-2) recognizes the bacterial molecule lipopolysaccharide (LPS) and triggers an inflammatory response. It is believed that zebrafish have neither Md-2 nor Tlr4: Md-2 has not been identified outside of amniotes, while the zebrafish tlr4 genes appear to be paralogs, not orthologs, of amniote TLR4s. We revisited these conclusions. We identified a zebrafish gene encoding Md-2, ly96. Using single-cell RNA-Seq, we found that ly96 is transcribed in cells that also transcribe genes diagnostic for innate immune cells, including the zebrafish tlr4-like genes. Unlike amniote LY96, zebrafish ly96 expression is restricted to a small number of macrophage-like cells. In a functional assay, zebrafish Md-2 and Tlr4a form a complex that activates NF-κB signaling in response to LPS, but ly96 loss-of-function mutations gave little protection against LPS-toxicity in larval zebrafish. Finally, by analyzing the genomic context of tlr4 genes in eleven jawed vertebrates, we found that tlr4 arose prior to the divergence of teleosts and tetrapods. Thus, an LPS-sensitive Tlr4/Md-2 complex is likely an ancestral feature shared by mammals and zebrafish, rather than a de novoinvention on the tetrapod lineage. We hypothesize that zebrafish retain an ancestral, low-sensitivity Tlr4/Md-2 complex that confers LPS-responsiveness to a specific subset of innate immune cells.