This chapter reviews the expression and regulation of opioid receptors in sensory neurons and the interactions of these receptors with endogenous and exogenous opioid ligands. Inflammation of peripheral tissues leads to increased synthesis and axonal transport of opioid receptors in dorsal root ganglion neurons. This results in opioid receptor upregulation and enhanced G protein coupling at peripheral sensory nerve terminals. These events are dependent on neuronal electrical activity, and on production of proinflammatory cytokines and nerve growth factor within the inflamed tissue. Together with the disruption of the perineurial barrier, these factors lead to an enhanced analgesic efficacy of peripherally active opioids. The major local source of endogenous opioid ligands (e.g. beta-endorphin) is leukocytes. These cells contain and upregulate signal-sequence-encoding messenger RNA of the beta-endorphin precursor proopiomelanocortin and the entire enzymatic machinery necessary for its processing into the functionally active peptide. Opioid-containing immune cells extravasate using adhesion molecules and chemokines to accumulate in inflamed tissues. Upon stressful stimuli or in response to releasing agents such as corticotropin-releasing factor, cytokines, chemokines, and catecholamines, leukocytes secrete opioids. Depending on the cell type, this release is contingent on extracellular Ca(2+) or on inositol triphosphate receptor triggered release of Ca(2+) from endoplasmic reticulum. Once secreted, opioid peptides activate peripheral opioid receptors and produce analgesia by inhibiting the excitability of sensory nerves and/or the release of proinflammatory neuropeptides. These effects occur without central untoward side effects such as depression of breathing, clouding of consciousness, or addiction. Future aims include the development of peripherally restricted opioid agonists, selective targeting of opioid-containing leukocytes to sites of painful injury, and the augmentation of peripheral opioid peptide and receptor synthesis.