Septic shock is caused by Gram-negative bacterial infection. Lipopolysaccharide (LPS) is the bioactive molecule present on the outer membrane of the Gram-negative bacteria. It is generally thought that LPS interacts with sensors on the host cell membrane to activate the intracellular signaling pathway resulting in the overproduction of cytokines such as TNF-alpha. This causes inflammation and ultimately, septic shock. Lipid A is the pharmacophore of the LPS molecule. Thus, developing bio-molecules which are capable of binding LPS at high affinity, especially to the lipid A moiety is an efficient way to neutralize the LPS toxicity. Factor C, a serine protease in the horseshoe crab ameobocytes, is sensitive to trace levels of LPS. We have derived Sushi peptides from the LPS-binding domains of Factor C. Our earlier study showed that the Sushi peptides inhibit LPS-induced septic shock in mice. Here, we demonstrate that the molecular interaction between LPS and Sushi 1 peptide is supported by the hydrophobic interaction between the lipid tail of LPS and Sushi 1 peptide. Furthermore, in the presence of LPS, the peptide transitions from a random structure into an alpha-helical conformation and it disrupts LPS aggregates, hence, neutralizing the LPS toxicity.