Background: A correct balance between protease and inhibitor activity is critical in the maintenance of homoeostasis; excessive activation of enzyme pathways is frequently associated with inflammatory disorders. Plasmin is an enzyme ubiquitously activated in inflammatory disorders, and C1-inhibitor (C1-Inh) is a pivotal inhibitor of protease activity, which is particularly important in the regulation of enzyme cascades generated in plasma. The nature of the interaction between plasmin and C1-Inh is poorly understood. Materials and Methods: C1-Inh was immunoadsorbed from the plasma of normal individuals (n = 21), from that of patients with systemic lupus erythematosus (n = 18) or adult respiratory distress syndrome (n = 9), and from the plasma and synovial fluid of patients with rheumatoid arthritis (n = 18). As plasmin is a putative enzyme responsible for C1-Inh degradation, the interaction between plasmin and C1-Inh was examined using SDS-PAGE. In addition, peptides cleaved from C1-Inh by plasmin were isolated and sequenced and the precise cleavage sites determined from the known primary sequence of C1-Inh. Homology models of C1-Inh were then constructed. Results: Increased levels of cleaved and inactivated C1-Inh were found in each of the inflammatory disorders examined. Through SDS-PAGE analysis it was shown that plasmin rapidly degraded C1-Inh in vitro. The pattern of C1-Inh cleavage seen in vivo in patients with inflammatory disorders and that produced in vitro following incubation with plasmin were very similar. Homology models of C1-Inh indicate that the majority of the plasmin cleavage sites are adjacent to the reactive site of the inhibitor. Conclusions: This study suggests that local C1-Inh degradation by plasmin may be a central and critical event in the loss of protease inhibition during inflammation. These findings have important implications for our understanding of pathogenic mechanisms in inflammation and for the development of more effectively targeted therapeutic regimes. These findings may also explain the efficacy of anti-plasmin agents in the treatment of C1-Inh deficiency states, as they may diminish plasmin-mediated C1-Inh degradation.