The protein C system is an important natural anticoagulant mechanism mediated by activated protein C (APC) that regulates the activity of factors VIIIa and Va. Besides well-defined anticoagulant properties, APC also demonstrates anti-inflammatory, anti-apoptotic and endothelial barrier-stabilizing effects that are collectively referred to as the cytoprotective effects of APC. Many of these beneficial effects are mediated through its co-receptor endothelial protein C receptor, and the protease-activated receptor 1, although exact mechanisms remain unclear and are likely pleiotropic in nature. Increased insight into the structure-function relationships of APC facilitated design of APC variants that conserve cytoprotective effects and reduce anticoagulant features, thereby attenuating the risk of severe bleeding with APC therapy. Impairment of the protein C system plays an important role in acute lung injury/acute respiratory distress syndrome and severe sepsis. The pathophysiology of both diseases states involves uncontrolled inflammation, enhanced coagulation and compromised fibrinolysis. This leads to microvascular thrombosis and organ injury. Administration of recombinant human APC to correct the dysregulated protein C system reduced mortality in severe sepsis patients (PROWESS trial), which stimulated further research into its mechanisms of action. Several other clinical trials evaluating recombinant human APC have been completed, including studies in children and less severely ill adults with sepsis as well as a study in acute lung injury. On the whole, these studies have not supported the use of APC in these populations and challenge the field of APC research to search for additional answers.