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Bacterial endotoxin (lipopolysaccharide, LPS) is responsible for the septic shock syndrom. As potential therapeutic agents cyclic cationic antimicrobial peptides of different length, based on the Limulus anti-lipopolysaccharide factor (LALF), were synthesized, and their interaction with LPS was characterized physico-chemically and related to results in biological assays. All peptides inhibited the LPS-induced cytokine production in human mononuclear cells and the Limulus amebocyte lysate in a concentration-dependent way, with the peptide comprising the complete LPS-binding loop of the LALF (cLALF22) being the most effective. The peptides were neither cytotoxic nor hemolytic, except a slight effect of cLALF22. The peptides were able to displace Ca2+ cations from a LPS monolayer, with cLALF22 being again most effective in accordance with results from isothermal titration calorimetry, in which saturation of binding was observed at an equimolar [cLALF22]:[LPS] ratio, and at a ratio 2–2.5 for the other peptides. For cLALF22, zeta (σ) potential experiments exhibited a complete compensation of the negative charges of LPS, whereas for the other peptides a residual negative potential of −20 to −40 mV was found. X-ray diffraction experiments showed that the mixed unilamellar/cubic inverted aggregate structure of the lipid A part of LPS was converted into a multilamellar one. The gel to liquid crystalline phase transition of the acyl chains of LPS was changed upon cLALF22 binding, leading to a clear fluidization, which was not observed or only to a lesser degree for the other peptides. The affinity of the peptides for LPS led to a reduced binding of lipopolysaccharide-binding protein (LBP) to target membranes and hence to an inhibition of cytokine induction in human mononuclear cells.