The development of novel peptide antibiotics with potent activity against multidrug-resistant Gram-negative bacteria and anti-septic activity is urgently needed. In this study, we designed short, 12-meric antimicrobial peptides by substituting amino acids from the N-terminal 12 residues of the papiliocin (Pap12-1) peptide to alter cationicity and amphipathicity and improve antibacterial activity and bacterial membrane interactions. Pap12-6, with an amphipathic α-helical structure and Trp12 at the C-terminus, showed broad-spectrum antibacterial activity, especially against multidrug-resistant Gram-negative bacteria. Dye leakage, membrane depolarization, and electron microscopy data proved that Pap12-6 kills bacteria by permeabilizing the bacterial membrane. Additionally, Pap12-6 significantly reduced the secretion of NO, TNF-α, and IL-6 and secreted alkaline phosphatase reporter gene activity confirmed that Pap12-6 shows anti-inflammatory activity via a TLR4-mediated NF-κB signaling pathway. In a mouse sepsis model, Pap12-6 significantly improved survival, reduced bacterial growth in organs, and reduced LPS and inflammatory cytokine levels in the serum and organs. Pap12-6 showed minimal cytotoxicity towards mammalian cells and controlled liver and kidney damage, proving its high bacterial selectivity. Our results suggest that Pap12-6 is a promising peptide antibiotic for the therapeutic treatment of Gram-negative sepsis via dual bactericidal and immunomodulatory effects on the host.