LPS-binding protein (LBP) is a 60-kDa acute phase glycoprotein capable of binding the LPS of Gram-negative bacteria and facilitating its diffusion. This process is thought to be of potential importance in inflammatory reactions and pathogenic states such as septic shock syndrome. Here, we report on the identification of a LPS binding domain within the LBP molecule and on the identification of single amino acids important for binding of LPS by LBP. Several synthetic LBP peptides inhibited LPS-LBP interaction, and amino acids Arg 94 and Lys 95 were centrally located in these inhibitory peptides. LBP mutants with amino acid exchanges within this region were expressed and tested in five different functional assays: binding to immobilized LPS; facilitation of binding of LPS aggregates to monocytes; transfer of LPS monomers from aggregates to soluble CD14; transfer of soluble CD14-bound LPS monomers to high density lipoprotein (HDL); and enhancement of LPS-induced cell activation. The double mutant Glu 94/Glu 95 was completely lacking LPS binding, transfer, and cell stimulatory activity, indicating that the integrity of amino acids 94 and 95 is required for LBP function. While mutations of amino acids Arg 94 or Lys 95 into alanine reduced the LPS binding activity of LBP dramatically, the ability to facilitate binding of LPS aggregates to membrane CD14 at the cell surface was retained. These findings emphasize the distinction between binding of LPS aggregates to cells, which is not associated with cell stimulation, and binding of LPS monomers to CD14, which leads to cell stimulation.