Toll-like receptors (TLRs) play a central role in both the innate and adaptive immune systems by recognizing pathogen-associated molecular patterns and inducing the release of the effector molecules of the immune system. The dysregulation of the TLR system may cause various autoimmune diseases and septic shock. A series of molecular dynamics simulations and free energy calculations were performed to investigate the ligand-free, lipopolysaccharide (LPS)-bound, and neoseptin3-bound (TLR4-MD2)2 tetramers. Compared to earlier simulations done by others, our simulations showed that TLR4 structure was well maintained with stable interfaces. Free energy decomposition by molecular mechanics Poisson-Boltzmann surface area (MM-PBSA) method suggests critical roles that two hydrophobic clusters I85-L87-P88 and I124-L125-P127 of MD2, together with LPS and neoseptin3, may play in TLR4 activation. We propose that 1) direct contacts between TLR4 convex surface and LPS and neoseptin3 at the region around L442 significantly increase the binding and 2) binding of LPS and neoseptin3 in the central hydrophobic cavity of MD2 triggers burial of F126 and exposure of I85-L87-P88 that facilitate formation of (TLR4-MD2)2 tetramer and activation of TLR4 system.