To explore regulation of potentially lethal responses to bacterial lipopolysaccharide (LPS), we used differential display under LPS-free conditions to compare macrophage cell lines from two strains of mice congenic for a locus affecting LPS sensitivity. LPS- hyporesponsive cells, primary macrophages, and polymorphonuclear leukocytes transcribed secretory leukocyte protease inhibitor (SLPI), a known epithelial cell-derived inhibitor of leukocyte serine proteases. Transfection of macrophages with SLPI suppressed LPS-induced activation of NF-κB and production of nitric oxide and TNFα. The ability of interferon-γ (IFNγ) to restore LPS responsiveness is a hallmark of the LPS-hyporesponsive phenotype. IFNγ suppressed expression of SLPI and restored LPS responsiveness to SLPI-producing cells. Thus, SLPI is an LPS-induced IFNγ-suppressible phagocyte product that serves to inhibit LPS responses.