The iron-binding protein lactoferrin is a multifunctional protein that has antibacterial, antifungal, antiviral, antitumour, anti-inflammatory, and immunoregulatory properties. All of these additional properties appear to be related to its highly basic N-terminal region. This part of the protein can be released in the stomach by pepsin cleavage at acid pH. The 25-residue antimicrobial peptide that is released is called lactoferricin. In this work, we review our knowledge about the structure of the peptide and attempt to relate this to its many functions. Microcalorimetry and fluorescence spectroscopy data regarding the interaction of the peptide with model membranes show that binding to net negatively charged bacterial and cancer cell membranes is preferred over neutral eukaryotic membranes. Binding of the peptide destabilizes the regular membrane bilayer structure. Residues that are of particular importance for the activity of lactoferricin are tryptophan and arginine. These two amino acids are also prevalent in "penetratins", which are regions of proteins or synthetic peptides that can spontaneously cross membranes and in short hexapeptide antimicrobial peptides derived through combinatorial chemistry. While the antimicrobial, antifungal, antitumour, and antiviral properties of lactoferricin can be related to the Trp/Arg-rich portion of the peptide, we suggest that the anti-inflammatory and immunomodulating properties are more related to a positively charged region of the molecule, which, like the alpha- and beta-defensins, may act as a chemokine. Few small peptides are involved in as wide a range of host defense functions as bovine and human lactoferricin.