Communication between nerves and immune and inflammatory cells of the small and large intestine plays a major role in the modulation of several intestinal functions, including intestinal motility, ion transport, and mucosal permeability. Neuroimmune interactions at intestinal sites have been associated with the pathophysiology of infectious and enterotoxin-mediated diarrhea and intestinal inflammation, including inflammatory bowel disease (IBD). During the past 20 years the neuropeptide substance P (SP) has been identified as an important mediator in the development and progress of intestinal inflammation by binding to its high-affinity neurokinin-1 receptor (NK-1R). This peptide, released from enteric nerves, sensory neurons, and inflammatory cells of the lamina propria during intestinal inflammation, participates in gut inflammation by interacting, directly or indirectly, with NK-1R expressed on nerves, epithelial cells, and immune and inflammatory cells, such as mast cells, macrophages, and T cells. SP-dependent activation of these cells leads to the release of cytokines and chemokines as well as other neuropeptides that modulate diarrhea, inflammation, and motility associated with the pathophysiology of several intestinal disease states. The recent development of specific nonpeptide NK-1R antagonists and NK-1R-deficient mice helped us understand the functional importance of the SP-NK-1R system in mediating intestinal neuroimmune interactions and to identify the particular cells and signaling pathways involved in this response. This review summarizes our understanding on the immunomodulatory properties of SP and its receptor in the intestinal tract with particular focus on their involvement in intestinal physiology as well as in the pathophysiology of several intestinal disease states at the in vivo and cell signaling level.