Annexin I is a 36 kilodalton (kD) calcium-dependent phospholipid-binding protein which may have anti-inflammatory properties. Previous investigations which sampled lower respiratory tract epithelial lining fluid (ELF) via bronchoalveolar lavage (BAL) have demonstrated that annexin I can be degraded in inflammatory lung disease. We analyzed BAL fluid from patients with cystic fibrosis (CF) to determine the effects of lung inflammation on the structure and activity of annexin I. Intact annexin I was absent in 17 out of 20 BAL fluid samples from patients with CF, due largely to degradation to a 33 kD protein. The three CF BAL fluids in which annexin I was detectable had very little or no unopposed neutrophil elastase activity in contrast to the 17 in which no annexin I was detectable. Annexin I was present in all BAL fluid samples from 10 normal volunteer (NV) subjects and 12 patients with interstitial lung disease (ILD). The 33 kD annexin I breakdown product was not detectable in samples from NV, but was detectable only in ILD patients with relatively high percentages of neutrophils on BAL differential cell counts. Annexin I appeared to be cleaved by neutrophil elastase at the N-terminal portion between Val-36 and Ser-37 to yield the 33 kD protein. Cleavage of the N-terminal portion of annexin I was accompanied by a marked change in the annexin I isoelectric point (pI) value (from 6.0 to 8.5-9.0) and greatly diminished annexin I functional activity. Our findings demonstrate that annexin I degradation in epithelial lining fluid is closely related to lung inflammation.