Lipopolysaccharides in the cell walls of Gram-negative bacteria elicit toxic as well as potentially beneficial inflammatory responses in animals. It is now reported that tissue toxicity caused by lipopolysaccharides is preferentially reduced by an enzymatic activity in human neutrophils. Acyloxyacyl hydrolysis removes fatty acyl chains that are linked to the hydroxyl groups of 3-hydroxytetradecanoyl residues in the bioactive lipid A moiety of the lipopolysaccharides. Maximal acyloxyacyl hydrolysis reduced lipopolysaccharide tissue toxicity, as measured in the dermal Shwartzman reaction, by a factor of 100 or more. In contrast, the ability of the deacylated lipopolysaccharides to stimulate B lymphocytes to divide was decreased only by a factor of 12. It is suggested that during tissue invasion by Gram-negative bacteria acyloxyacyl hydrolysis may be a defense mechanism that reduces the toxicity of lipopolysaccharides while preserving some of their potentially beneficial inflammatory and immune stimuli.