Severe sepsis will affect more than 870,000 individuals in the US this year, and has a mortality of approximately 30%. The pathophysiology of sepsis is believed to involve a complex cascade of inflammation, endothelial dysfunction, microthrombus formation and microvascular failure, leading to multiple organ failure and death. Despite numerous trials of immunomodulators and anticoagulants, only activated protein C (APC) has been shown to prolong life in patients with severe sepsis. However, current evidence suggests that any benefit from APC is currently outweighed by risks. The failure of clinical trials to consistently show benefit from APC therapy may be related to the increased rate of life-threatening hemorrhage in patients treated with APC. The possibility exists that modifications of the APC molecule may separate the harmful from the beneficial effects. This review summarizes the many diverse actions of APC and relates these to current evidence regarding the pathophysiology of sepsis.