Alcohol exposure is known to sensitize acinar cells to various insults but the pathophysiological mechanisms of alcoholic pancreatitis remain unknown. Alcohol abuse has been shown to mediate an anti-inflammatory response and periods of immune suppression seem to be associated with organ injury and mortality. The purpose of this study was to determine the mechanisms by which alcohol exerts transcriptional activities in the rat pancreas and how alcohol alters the inflammatory response. Using the Lieber–DeCarli alcohol/control diet, rats that were fed with alcohol over 14 weeks demonstrated a decrease of inflammatory cells in pancreatic tissue compared to controls. The anti-inflammatory effects of alcohol were confirmed by decreased expression of pro-inflammatory cytokines including TNFα, IL-1β, IL-18, TGFβ, and MCP-1. In addition, alcohol significantly increased the activity of PPARγ, which is a known anti-inflammatory transcription factor, while pro-inflammatory factors including AP-2 and EGR-1 were significantly suppressed. NFκB binding showed a tendency towards a reduction. Electron microscopy studies revealed enlarged and injured mitochondria and lysosomes, accompanied by peri-cellular fibrosis. Furthermore, alcohol exposure increased the activities of trypsin and cathepsin B, both known to be critical in initiating acinar cell injury and pancreatitis. Despite the known alcohol-mediated acinar cell and mitochondrial injury, the mitochondrial-mediated apoptotic pathway was attenuated. These data demonstrate that the pancreas exposed to alcohol maintains an anti-inflammatory state by activating PPARγ. Intracellular mitochondrial and lysosomal damage after chronic alcohol exposure induces premature activation of digestive enzymes and establishment of peri-cellular fibrosis in the absence of inflammation. Copyright © 2007 Pathological Society of Great Britain and Ireland. Published by John Wiley & Sons, Ltd.