Reactive oxygen intermediates generated by the phagocyte NADPH oxidase are critically important components of host defense. However, these highly toxic oxidants can cause significant tissue injury during inflammation; thus, it is essential that their generation and inactivation are tightly regulated. We show here that an endogenous proline-arginine (PR)-rich antibacterial peptide, PR-39, inhibits NADPH oxidase activity by blocking assembly of this enzyme through interactions with Src homology 3 domains of a cytosolic component. This neutrophil-derived peptide inhibited oxygen-dependent microbicidal activity of neutrophils in whole cells and in a cell-free assay of NADPH oxidase. Both oxidase inhibitory and direct antimicrobial activities were defined within the amino-terminal 26 residues of PR-39. Oxidase inhibition was attributed to binding of PR-39 to the p47phox cytosolic oxidase component. Its effects involve both a polybasic amino-terminal segment and a proline-rich core region of PR-39 that binds to the p47phox Src homology 3 domains and, thereby, inhibits interaction with the small subunit of cytochrome b558, p22phox. These findings suggest that PR-39, which has been shown to be involved in tissue repair processes, is a multifunctional peptide that can regulate NADPH oxidase production of superoxide anion O2-. thus limiting excessive tissue damage during inflammation.