Lipopolysaccharide (LPS) binding protein (LBP), a 58-60 kDa glycoprotein, binds to the lipid A region of LPS. The resulting LPS-LBP complex is recognized by both the membrane-bound (mCD14) and soluble forms of CD14 (sCD14), thereby enhancing the ability of LPS to activate myeloid, endothelial, and epithelial cells. To begin to characterize the structure-function relationships within LBP, we have created and expressed a truncated form of human LBP (herein called NH-LBP) comprising amino acid residues 1-197 of the parent molecule. Experiments were done to characterize the ability of NH-LBP to bind LPS and to promote LPS binding to CD14. We found that NH-LBP efficiently binds LPS but does not transfer the LPS to either mCD14 or sCD14. Additionally, NH-LBP inhibited LPS binding to LBP, inhibited the LBP-promoted binding of LPS to CD14, and inhibited the LBP-dependent activation of rabbit peritoneal exudate macrophages. The apparent dissociation constant for LPS-NH-LBP complexes is less than 1 x 10(-8) M which compares well with the dissociation constant for LPS-LBP complexes of approximately 1 x 10(-9) M. We conclude from these studies that the LPS binding site of LBP resides in the amino-terminal half of LBP and that the CD14 interaction site resides in the carboxyl-terminal half of LBP. These data suggest that appropriately modified fragments of LBP might provide novel reagents with high LPS binding affinity that could be useful in inhibiting LPS-dependent cellular activation in vivo.