The primary purpose of the present study was to investigate the mechanism of the counter-irritating activity of topical iodine against skin lesions induced by chemical and thermal stimuli. The hypothesis that iodine exerts its activity by inducing an endogenous anti-inflammatory factor was confirmed by exposing guinea pig skin to heat stimulus followed by topical iodine treatment and skin extraction. Injection of the extract into naïve guinea pigs reduced heat-induced irritation by 69%. The protective factor, identified as a new nonapeptide (histone H2A 36-44, H-Lys-Gly-Asn-Tyr-Ala-Glu-Arg-Ileu-Ala-OH), caused reduction of 40% in irritation score in heat-exposed guinea pigs. The murine analog (H-Lys-Gly-His-Tyr-Ala-Glu-Arg-Val-Gly-OH, termed IIIM1) reduced sulfur mustard (SM)-induced ear swelling at a dose-dependent bell-shape manner reaching peak activity of 1 mg/kg. Cultured keratinocytes transfected with the peptide were more resistant towards SM than the control cells. The peptide suppressed oxidative burst in activated neutrophils in a concentration-dependent manner. In addition, the peptide reduced glucose oxidase-induced skin edema in mice at a dose-dependent bell-shape manner. Apart from thermal and chemical-induced skin irritation this novel peptide might be of potential use in chronic dermal disorders such as psoriasis and pemphigus as well as non-dermal inflammatory diseases like multiple sclerosis, arthritis and colitis.