The bactericidal/permeability-increasing protein (BPI) of neutrophils and BPI fragments neutralize the effects of isolated Gram-negative bacterial lipopolysaccharides both in vitro and in vivo. Since endotoxin most commonly enters the host as constituents of invading Gram-negative bacteria, we raised the question: Can BPI and its bioactive fragments also protect against whole bacteria? To determine whether the bactericidal and endotoxin-neutralizing activities of BPI/fragments are expressed when Gram-negative bacteria are introduced to the complex environment of whole blood we examined the effects of added BPI and proteolytically prepared and recombinant NH2-terminal fragments on: (a) the fate of serum-resistant encapsulated Escherichia coli, Klebsiella pneumoniae, and Pseudomonas aeruginosa that survive the antibacterial actions of whole blood and (b) the ability of these bacteria to trigger cytokine release. Added BPI in nanomolar concentrations killed each of three encapsulated strains of E. coli and in closely parallel fashion inhibited tumor necrosis factor (TNF) release. Holo-BPI and its NH2-terminal fragment were equipotent toward a rough LPS chemotype K1-encapsulated strain, but the fragment was substantially more potent than holo-BPI toward two encapsulated smooth LPS chemotype strains. TNF release induced by K. pneumoniae and P. aeruginosa was also inhibited by both holo-BPI and fragment but, at the protein concentrations tested, P. aeruginosa was killed only by the fragment and K. pneumoniae was not killed by either protein. The bactericidal action of BPI/fragment toward E. coli is inhibited by C7-depleted serum, but accelerated by normal serum, indicating that BPI, acting in synergy with late complement components, enhances extracellular killing of serum-resistant bacteria. Thus, BPI and an even more potent NH2-terminal fragment may protect against Gram-negative bacteria in the host by blocking bacterial proliferation as well as endotoxin-mediated effects, not only as components of the intracellular antibacterial arsenal of the neutrophil, but also as potentially therapeutic extracellular agents.