Targeted mutation of the myeloid transcription factor C/EBPɛ in mice results in gram-negative septic death at 3 to 5 months of age. This study defines the underlying molecular defects in their terminal granulocytic differentiation. The mRNA for the precursor protein of the cathelin-related antimicrobial peptides was almost completely absent in the bone marrow cells of C/EBPɛ−/− mice. This finding may help explain their susceptibility to gram-negative sepsis, because both are bacteriocidal peptides with potent activity against gram-negative bacteria. Superoxide production was found to be reduced in both granulocytes and monocytes of C/EBPɛ−/− mice. While gp91 phox protein levels were normal, p47phox protein levels were considerably reduced in C/EBPɛ −/− granulocytes/monocytes, possibly limiting the assembly of the NADPH oxidase. In addition, expression of mRNA of the secondary and tertiary granule proteins, lactoferrin and gelatinase, were not detected, and levels of neutrophil collagenase mRNA were reduced in bone marrow cells of the knock-out mice. The murine lactoferrin promoter has a putative C/EBP site close to the transcription start site. C/EBPɛ bound to this site in electromobility shift assay studies and mutation of this site abrogated binding to it. A mutation in the C/EBP site reduced the activity of the promoter by 35%. Furthermore, overexpression of C/EBPɛ in U937 cells increased the activity of the wild-type lactoferrin promoter by 3-fold. In summary, our data implicate C/EBPɛ as a critical factor of host antimicrobial defense and suggests that it has a direct role as a positive regulator of expression of lactoferrin in vivo.