The adhesion molecule intercellular adhesion molecule-1 (ICAM-1), in addition to its membrane-associated form (mICAM-1), also exists as a soluble form (sICAM-1). sICAM-1 is capable of binding to lymphocyte function associated antigen-1 (LFA-1) molecules, and production of sICAM-1 is therefore thought to have immunomodulatory consequences. The present study, which employed normal human keratinocytes as a model for sICAM-1-producing cells, was conducted to determine the mechanism responsible for the production of sICAM-1 and to develop a strategy for specific inhibition of sICAM-1 production. Stimulation of keratinocytes with recombinant human gamma-interferon (rhIFN-gamma) induced both expression of mICAM-1 and production of sICAM-1. Western blot analysis revealed that keratinocyte-derived sICAM-1, compared to mICAM-1, had a smaller molecular size, approximately a 7-kD difference. Neither by Northern blot analysis nor by reverse-transcriptase polymerase chain reaction (RT-PCR) was any evidence for alternatively spliced ICAM-1 mRNA obtained. Addition of the protease inhibitors iodoacetamide and E-64, however, inhibited the production of sICAM-1 in a dose-dependent manner. The involvement of proteolytic cleavage in the production of sICAM-1 was corroborated in minimal peptide protection assays, in which minimal peptides covering the potential cleavage site of ICAM-1 were added to sICAM-1-producing keratinocytes. One of these peptides, ICAM cleavage inhibitory peptide (ICAM-CIP), inhibited the production of sICAM-1 without affecting mICAM-1 expression. These studies demonstrate that sICAM-1 production in human keratinocytes is due to proteolytic cleavage, and that the oligopeptide ICAM-CIP may specifically inhibit this mechanism. The capacity of ICAM-CIP to selectively prevent production of sICAM-1 may be useful for the development of novel therapeutic approaches relevant for the management of inflammation and cancer.