Inhalation of particulate matter in the ambient air has been shown to cause pulmonary morbidity and exacerbate asthma. Alveolar macrophage (AM) are essential for effective removal of inhaled particles and microbes in the lower airways. While some particles minimally effect AM function others inhibit antimicrobial activity or cause cytokine and growth factor production leading to inflammation and tissue remodeling. This study has investigated the effects of water soluble (s) and insoluble (is) components of Chapel Hill, North Carolina ambient particulate matter in the size ranges 0.1-2.5 microm (PM2.5) and 2.5-10 microm (PM10) diameter, on human AM IL-6, TNFalpha, and MCP-1 cytokine production and host defense mechanisms including phagocytosis and oxidant production. Cytokines were found to be induced by isPM10 to a much higher extent (>50-fold) than sPM10, which in turn stimulated production better than isPM2.5, while sPM2.5 was inactive. Previous studies have indicated that endotoxin (ETOX) is a component of sPM10 responsible for cytokine production. Here, it is shown that inhibition of isPM10-induced cytokine production was partially achieved with polymyxin B and LPS-binding protein (LBP), but not with a metal chelator, implicating ETOX as a cytokine-inducing moiety also in isPM10. In addition to inducing cytokines, exposure to isPM10, but not the other PM fractions, also inhibited phagocytosis and oxidant generation in response to yeast. This inhibition was ETOX independent. The decrease in host defenses may be the result of apoptosis in the AM population, which was also found to be specifically caused by isPM10. These results show that the functional capacity of AM is selectively modulated by insoluble components of coarse PM, including the biocontaminant ETOX.