Peptidoglycan (PGN) consists of repeating units of N-acetyl-glucosamine (GlcNAc) and N-acetylmuramic acid (MurNAc), which are cross-linked by short peptides. It is well known that PGN forms a major cell wall component of bacteria making it an important ligand for the recognition by peptidoglycan recognition proteins (PGRPs) of the host. The binding studies showed that PGN, GlcNAc, and MurNAc bind to camel PGRP-S (CPGRP-S) with affinities corresponding to dissociation constants of 1.3×10-9, 2.6×10 -7, and 1.8×10-7 M, respectively. The crystal structure determinations of the complexes of CPGRP-S with GlcNAc and MurNAc showed that the structures consist of four crystallographically independent molecules, A, B, C, and D, in the asymmetric unit that exists as A-B and C-D units of two neighboring linear polymers. The structure determinations showed that compounds GlcNAc and MurNAc bound to CPGRP-S at the same subsite in molecule C. Both GlcNAc and MurNAc form several hydrogen bonds and extensive hydrophobic interactions with protein atoms, indicating the specific nature of their bindings. Flow cytometric studies showed that PGN enhanced the secretions of TNF-α and IL-6 from human peripheral blood mononuclear cells. The introduction of CPGRP-S to the PGN-challenged cultured peripheral blood mononuclear cells reduced the expressions of proinflammatory cytokines, TNF-α and IL-6. This showed that CPGRP-S inhibited PGN-induced production of proinflammatory cytokines and down-regulated macrophage-mediated inflammation, indicating its potential applications as an antibacterial agent.