Deacylation of purified lipopolysaccharides (LPS) markedly reduces its toxicity toward mammals. However, the biological significance of LPS deacylation during infection of the mammalian host is uncertain, particularly because the ability of acyloxyacyl hydrolase, the leukocyte enzyme that deacylates purified LPS, to attack LPS residing in the bacterial cell envelope has not been established. We recently showed that the cellular and extracellular components of a rabbit sterile inflammatory exudate are capable of extensive and selective removal of secondary acyl chains from purified LPS. We now report that LPS as a constituent of the bacterial envelope is also subject to deacylation in the same inflammatory setting. Using Escherichia coli LCD25, a strain that exclusively incorporates radiolabeled acetate into fatty acids, we quantitated LPS deacylation as the loss of radiolabeled secondary (laurate and myristate) and primary fatty acids (3-hydroxymyristate) from the LPS backbone. Isolated mononuclear cells and neutrophils removed 50% and 20-30%, respectively, of the secondary acyl chains of the LPS of ingested whole bacteria. When bacteria were killed extracellularly during incubation with ascitic fluid, no LPS deacylation occurred. In this setting, the addition of neutrophils had no effect, but addition of mononuclear cells resulted in removal of >40% of the secondary acyl chains by 20 h. Deacylation of LPS was always restricted to the secondary acyl chains. Thus, in an inflammatory exudate, primarily in mononuclear phagocytes, the LPS in whole bacteria undergoes substantial and selective acyloxyacyl hydrolase-like deacylation, both after phagocytosis of intact bacteria and after uptake of LPS shed from extracellularly killed bacteria. This study demonstrates for the first time that the destruction of Gram-negative bacteria by a mammalian host is not restricted to degradation of phospholipids, protein, and RNA, but also includes extensive deacylation of the envelope LPS.