Bacterial lipopolysaccharides (LPS), which are important components of the cell wall of gram-negative bacteria, induce a number of host responses both beneficial and harmful. The present review elucidates the uptake, distribution and functions of LPS in mononuclear phagocytes in an attempt to gain an insight into the mechanisms which control the pathogenesis of LPS mediated septic shock. The unique feature of LPS bilayer structure, the tagged LPS and antibodies to LPS provide means for studying binding, uptake, fate and subcellular distribution of LPS in tissues and cells. LPS bind to monocytes and macrophages by specific interaction via receptors such as scavenger receptors, CD14 and CD18 and by non-specific interactions, and enter the cells via receptor-mediated endocytosis, absorptive pinocytosis, phagocytosis, and diffusion. The ingested LPS are localized in pinocytic vesicles, phagocytic vacuoles, cytoplasm, mitochondria, rough endoplasmic reticulum, Golgi apparatus, and nucleus. The interactions of LPS with monocytes and macrophages trigger a broad spectrum of cellular responses, including production of important bioactive factors or mediators, such as IL-1, TNF, interferons, prostaglandins, and macrophage-derived growth factor, which are implicated in the pathogenesis of septic shock and wound healing. However, there is no conclusive evidence indicating that production of the mediators can only be induced through specific interactions.