The neutrophil enzyme, myeloperoxidase, by converting hydrogen peroxide (H2O2) and chloride to hypochlorous acid (HOCl), provides important defense against ingested micro-organisms. However, there is debate about how efficiently HOCl is produced within the phagosome and whether its reactions with phagosomal constituents influence the killing mechanism. The phagosome is a small space surrounding the ingested organism, into which superoxide, H2O2 and high concentrations of proteins from cytoplasmic granules are released. Previous studies imply that HOCl is produced in the phagosome, but a large proportion should react with proteins before reaching the microbe. To mimic these conditions, we subjected neutrophil granule extract to sequential doses of H2O2. Myeloperoxidase in the extract converted all the H2O2 to HOCl, which reacted with the granule proteins. 3-Chlorotyrosine, protein carbonyls and large amounts of chloramines were produced. At higher doses of H2O2, the extract developed potent bactericidal activity against Staphylococcus aureus. This activity was due to ammonia monochloramine, formed as a secondary product from protein chloramines and dichloramines. Isolated myeloperoxidase and elastase also became bactericidal when modified with HOCl and antibacterial activity was seen with a range of species. Comparison of levels of protein modification in the extract and in phagosomes implies that a relatively low proportion of phagosomal H2O2 would be converted to HOCl, but there should be sufficient for substantial protein chloramine formation and some breakdown to ammonia monochloramine. It is possible that HOCl could kill ingested bacteria by an indirect mechanism involving protein oxidation and monochloramine formation.