The anemia of inflammation is an acquired disorder affecting patients with a variety of medical conditions, and it is characterized by changes in iron homeostasis and erythropoiesis. Mounting evidence suggests that hepcidin antimicrobial peptide plays a primary role in the pathogenesis of the anemia of inflammation. To evaluate which features of this anemia can be attributed to hepcidin, we have generated mice carrying a tetracycline-regulated hepcidin transgene. Expression of the hepcidin transgene resulted in down-regulation of endogenous hepcidin mRNA. The transgenic mice developed a mild-to-moderate anemia associated with iron deficiency and iron-restricted erythropoiesis. Similar to the anemia of inflammation, iron accumulated in tissue macrophages, whereas a relative paucity of iron was found in the liver. Circulating erythrocytes in transgenic animals had normal survival rates, but transgenic animals had an impaired response to erythropoietin. Thus, hepcidin transgenic mice recapitulate each of the key features of anemia of inflammation in human patients and serve as a useful model of this prevalent disorder.