Hepcidin is an antimicrobial peptide produced by the liver in response to inflammatory stimuli and iron overload. Hepcidin regulates iron homeostasis by mediating the degradation of the iron export protein ferroportin 1, thereby inhibiting iron absorption from the small intestine and release of iron from macrophages. Here, we examined the expression of hepcidin in macrophages infected with the intracellular pathogens Mycobacterium avium and Mycobacterium tuberculosis. Stimulation of the mouse RAW264.7 macrophage cell line and mouse bone marrow-derived macrophages with mycobacteria and IFN-gamma synergistically induced high levels of hepcidin mRNA and protein. Similar results were obtained using the human THP-1 monocytic cell line. Stimulation of macrophages with the inflammatory cytokines IL-6 and IL-beta did not induce hepcidin mRNA expression. Iron loading inhibited hepcidin mRNA expression induced by IFN-gamma and M. avium, and iron chelation increased hepcidin mRNA expression. Intracellular protein levels and secretion of hepcidin were determined by a competitive chemiluminescence ELISA. Stimulation of RAW264.7 cells with IFN-gamma and M. tuberculosis induced intracellular expression and secretion of hepcidin. Furthermore, confocal microscopy analyses showed that hepcidin localized to the mycobacteria-containing phagosomes. As hepcidin has been shown to possess direct antimicrobial activity, we investigated its activity against M. tuberculosis. We found that hepcidin inhibited M. tuberculosis growth in vitro and caused structural damage to the mycobacteria. In summary, our data show for the first time that hepcidin localizes to the phagosome of infected, IFN-gamma-activated cells and has antimycobacterial activity.