An in vitro model system was used to define the mechanism of interaction between human neutrophils and lymphocytes. Blood mononuclear leukocytes were exposed to purified neutrophils in the presence of a neutrophil-activating agent (phorbol ester, lectin, or opsonized particle). The treated mononuclear cells displayed a marked decrease in both natural killer activity and mitogen-dependent DNA synthesis, but no change in viability. This functional suppression was dependent on neutrophil number, stimulus concentration, and duration of exposure. Lymphocytes were protected by addition of catalase, but not superoxide dismutase. Neutrophils defective in oxidative metabolism (chronic granulomatous disease) failed to suppress lymphocyte function unless an H2O2-generating system, glucose oxidase plus glucose, was added. The patients' neutrophils provided a factor, possibly myeloperoxidase, which interacted with the glucose oxidase system. The immunosuppressive effect of normal neutrophils was diminished when chloride was omitted from the cultures and was enhanced when chloride was replaced by iodide. Myeloperoxidase-deficient neutrophils were partially defective in suppressing lymphocytes and this was corrected by addition of purified myeloperoxidase. Paradoxically, azide caused enhancement of suppression that depended on the neutrophil oxidative burst, but not on myeloperoxidase and was mediated at least in part by an effect of azide on the target mononuclear leukocytes. These data indicate that suppression of lymphocyte function by activated neutrophils is mediated by the secretion of myeloperoxidase and H2O2 that react with halides to form immunosuppressive products. Moreover, the mononuclear leukocytes contain an azide-sensitive factor, probably catalase, which provides partial protection against injury by neutrophil products. These dynamic interactions may be important local determinants of the immune response.