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In arthropods, the melanization reaction is associated with multiple host defense mechanisms leading to the sequestration and killing of invading microorganisms. Arthropod melanization is controlled by a cascade of serine proteases that ultimately activates the enzyme prophenoloxidase (PPO), which, in turn, catalyzes the synthesis of melanin. Here we report the biochemical and genetic characterization of a Drosophila serine protease inhibitor protein, Serpin-27A, which regulates the melanization cascade through the specific inhibition of the terminal protease prophenoloxidase-activating enzyme. Our data demonstrate that Serpin-27A is required to restrict the phenoloxidase activity to the site of injury or infection, preventing the insect from excessive melanization.