Abstract Background Interleukin 1 (IL-1) is implicated in neuroinflammation, an essential component of neurodegeneration. We evaluated the potential anti-inflammatory effect of a novel peptide antagonist of IL-1 signaling, Ilantide. Methods We investigated the binding of Ilantide to IL-1 receptor type I (IL-1RI) using surface plasmon resonance, the inhibition of Il-1β-induced activation of nuclear factor κB (NF-κB) in HEK-Blue cells that contained an IL-1β-sensitive reporter, the secretion of TNF-α in macrophages, protection against IL-1-induced apoptosis in neonatal pancreatic islets, and the penetration of Ilantide through the blood–brain barrier using competitive enzyme-linked immunosorbent assay (ELISA). We studied the effects of the peptide on social behavior and memory in rat models of lipopolysaccharide (LPS)- and amyloid-induced neuroinflammation, respectively, and its effect in a rat model of experimental autoimmune enchephalomyelitis. Results Ilantide bound IL-1RI, inhibited the IL-1β-induced activation of NF-κB, and inhibited the secretion of TNF-α in vitro. Ilantide protected pancreatic islets from apoptosis in vitro and reduced inflammation in an animal model of arthritis. The peptide penetrated the blood–brain barrier. It reduced the deficits in social activity and memory in LPS- and amyloid-treated animals and delayed the development of experimental autoimmune enchephalomyelitis. Conclusions These findings indicate that Ilantide is a novel and potent IL-1RI antagonist that is able to reduce inflammatory damage in the central nervous system and pancreatic islets.