Inspired air contains a myriad of potential pathogens, pollutants and inflammatory stimuli. In the normal lung, these pathogens are rarely problematic. This is because the epithelial lining fluid in the lung is rich in many innate immunity proteins and peptides that provide a powerful anti-microbial screen. These defensive proteins have anti-bacterial, anti- viral and in some cases, even anti-fungal properties. Their antimicrobial effects are as diverse as inhibition of biofilm formation and prevention of viral replication. The innate immunity proteins and peptides also play key immunomodulatory roles. They are involved in many key processes such as opsonisation facilitating phagocytosis of bacteria and viruses by macrophages and monocytes. They act as important mediators in inflammatory pathways and are capable of binding bacterial endotoxins and CPG motifs. They can also influence expression of adhesion molecules as well as acting as powerful anti-oxidants and anti-proteases. Exciting new antimicrobial and immunomodulatory functions are being elucidated for existing proteins that were previously thought to be of lesser importance. The potential therapeutic applications of these proteins and peptides in combating infection and preventing inflammation are the subject of ongoing research that holds much promise for the future.