The molecular cloning and eukaryotic cell expression of the complementary DNA for human neutrophil acyloxyacyl hydrolase (AOAH) are described. AOAH is a leukocyte enzyme that selectively removes the secondary (acyloxyacyl-linked) fatty acyl chains from the lipid A region of bacterial lipopolysaccharides (endotoxins), thereby detoxifying the molecules. The two disulfide-linked subunits of the enzyme are encoded by a single mRNA. The amino acid sequence of the protein contains a lipase consensus sequence in the large subunit and a region in the small subunit that is similar to the saposins, cofactors for sphingolipid hydrolases. The recombinant enzyme, like native AOAH, hydrolyzes secondary acyl chains from more than one position on the lipopolysaccharide backbone. Acyloxyacyl hydrolase is a novel two-component lipase that, by deacylating lipopolysaccharides, may modulate host inflammatory responses to Gram-negative bacterial invasion.