Gram-negative bacteria (GNB) and their endotoxin present a constant environmental challenge. Endotoxins can potently signal mobilization of host defenses against invading GNB but also potentially induce severe pathophysiology, necessitating controlled initiation and resolution of endotoxin-induced inflammation to maintain host integrity. The bactericidal/permeability-increasing protein (BPI) is a pluripotent protein expressed, in humans, mainly neutrophils. BPI exhibits strong antimicrobial activity against GNB and potent endotoxin-neutralizing activity. BPI mobilized with neutrophils in response to invading GNB can promote intracellular and extracellular bacterial killing, endotoxin neutralization and clearance, and delivery of GNB outer membrane antigens to dendritic cells. Tissue expression by dermal fibroblasts and epithelia could further amplify local levels of BPI and local interaction with GNB and endotoxin, helping to constrain local tissue infection and inflammation and prevent systemic infection and systemic inflammation. This review article focuses on the structural and functional properties of BPI with respect to its contribution to host defense during GNB infections and endotoxin-induced inflammation and the genesis of autoantibodies against BPI that can blunt BPI activity and potentially contribute to chronic inflammatory disease.