Human hepcidin, a 25-amino acid peptide made by hepatocytes, may be a new mediator of innate immunity and the long-sought iron-regulatory hormone. The synthesis of hepcidin is greatly stimulated by inflammation or by iron overload. Evidence from transgenic mouse models indicates that hepcidin is the predominant negative regulator of iron absorption in the small intestine, iron transport across the placenta, and iron release from macrophages. The key role of hepcidin is confirmed by the presence of nonsense mutations in the hepcidin gene, homozygous in the affected members, in 2 families with severe juvenile hemochromatosis. Recent evidence shows that deficient hepcidin response to iron loading may contribute to iron overload even in the much milder common form of hemochromatosis, from mutations in the HFE gene. In anemia of inflammation, hepcidin production is increased up to 100-fold and this may account for the defining feature of this condition, sequestration of iron in macrophages. The discovery of hepcidin and its role in iron metabolism could lead to new therapies for hemochromatosis and anemia of inflammation.