High levels of pro-inflammatory cytokines and nitric oxide are proposed to orchestrate pathophysiologic mechanism(s) associated with various inflammatory dermatoses. This study examines whether a water soluble 3-O-[N-acetylmuramyl-L-lysyl-D-iso]-2-di-on-glycine [MDP(Lysyl)GDP], a nontoxic and nonpyrogenic derivative of muramyl dipeptide (MDP), can inhibit the in vitro production of inflammatory mediators by lipopolysaccharide- or interferon-gamma-activated macrophages, and whether such an inhibitory effect can translate into in vivo protection of mice from irritant and allergic contact dermatitis. Thioglycollate-elicited peritoneal macrophages cultured in medium alone or in medium supplemented with MDP(Lysyl)GDP (1-100 microg per ml) expressed neither mRNA transcripts for inducible nitric oxide synthase, interleukin-1beta, and tumor necrosis factor-alpha, nor cytokine proteins and nitric oxide activity. Incubation of the cells with either lipopolysaccharide or interferon-gamma for 6 h resulted in a significant induction of inducible nitric oxide synthase, interleukin-1beta, and tumor necrosis factor-alpha mRNA, and the accumulation of high levels of monokines and nitrites in cultures by 24 h. Co-incubation of the macrophages with lipopolysaccharide or interferon-gamma and MDP(Lysyl)GDP (1-100 microg per ml) resulted in a concentration-dependent suppression of the steady-state mRNA transcripts for inducible nitric oxide synthase, tumor necrosis factor-alpha, and interleukin-1beta, induced by lipopolysaccharide, but not by interferon-gamma. In mouse models of phorbol ester- and oxazolone-induced ear inflammation, topical application of MDP(Lysyl)GDP significantly suppressed ear swelling in a dose-dependent manner. Likewise, oral treatment with MDP(Lysyl)GDP at days -3, -2, and -1 before elicitation with oxazolone also significantly inhibited ear inflammation. Taken together, our findings suggest that MDP(Lysyl)GDP has the potential to be a therapeutic application in the treatment of inflammatory conditions in which overproduction of pro-inflammatory mediators are implicated to play a pathogenic role.