Human lipocortin I is a 38.5-kDa phospholipase A2 inhibitor that has been produced in Escherichia coli in large quantities by recombinant DNA technology (Wallner, B.P., Mattaliano, R.J., Hession, C., Cate, R. L., Tizard, R., Sinclair, L.K., Foeller, C., Chow, E.P., Browning, J.L., Ramachandran, K.L., and Pepinsky, R.B. (1986) Nature 320, 77-80). To localize the region within the protein responsible for its inhibitory activity, we generated a series of fragments of the recombinant product by limited proteolysis with elastase and characterized their structure by sequencing and peptide mapping. Five active fragments have been analyzed in detail. The smallest is an 18-kDa fragment derived from the amino-terminal half of lipocortin. Three of the larger fragments contain this region. The fifth fragment is missing 83 amino acids from the amino terminus. A region common to all the active fragments (amino acid residues 97-178) is 70% homologous with the corresponding region from a second member of the lipocortin family which recently was cloned (Huang, K-S., Wallner, B.P., Mattaliano, R.J., Tizard, R., Burne, C., Frey, A., Hession, C., McGray, P., Sinclair, L.K., Chow, E.P., Browning, J.L., Ramachandran, K.L., Tang, J., Smart, J.E., and Pepinsky, R.B. (1986) Cell 46, 191-199) and thus presumably is important for activity. In addition to inhibitory fragments, we have isolated a 3-kDa proteolytic fragment from the amino terminus of lipocortin I that contains the known phosphorylation site for protein-tyrosine kinases. Because of sequence homology of the 3-kDa fragment with biologically active synthetic peptides from pp60v-src and middle T antigen, its release by proteases may represent an important part of the activity of lipocortin.