Endotoxic shock, a syndrome characterized by deranged hemodynamics, coagulation abnormalities, and multiple system organ failure is caused by the release into the circulation of lipopolysaccharide (LPS), the structurally diverse component of Gram-negative bacterial outer membranes, and is responsible for 60% mortality in humans. Polymyxin B (PMB), a cyclic, cationic peptide antibiotic, neutralizes endotoxin but induces severe side effects in the process. The potent endotoxin neutralizing ability of PMB, however, offers possibilities for designing non-toxic therapeutic agents for combating endotoxicosis. Amongst the numerous approaches for combating endotoxic shock, peptide mediated neutralization of LPS seems to be the most attractive one. The precise mode of binding of PMB to LPS and the structural features involved therein have been elucidated only recently using a variety of biophysical approaches. These suggest that efficient neutralization of endotoxin by PMB is not achieved by mere binding to LPS but requires its sequestration from the membrane. Incorporation of this feature into the design of endotoxin neutralizing peptides should lead to the development of effective antidotes for endotoxic shock.