The increasing threat of antibiotic resistance in pathogenic bacteria and the dwindling supply of antibiotics available to combat these infections poses a significant threat to human health throughout the world. Antimicrobial peptides (AMPs) have long been touted as the next generation of antibiotics capable of filling the anti-infective void. Unfortunately, peptide-based antibiotics have yet to realize their potential as novel pharmaceuticals, in spite of the immense number of known AMP sequences and our improved understanding of their antibacterial mechanism of action. Recently, the immunomodulatory properties of certain AMPs have become appreciated. The ability of small synthetic peptides to protect against infection in vivo has demonstrated that modulation of the innate immune response is an effective strategy to further develop peptides as novel anti-infectives. This review focuses on the screening methods that have been used to assess novel peptide sequences for their antibacterial and immunomodulatory properties. It will also examine how we have progressed in our ability to identify and optimize peptides with desired biological characteristics and enhanced therapeutic potential. In addition, the current challenges to the development of peptides as anti-infectives are examined and the strategies being used to overcome these issues are discussed. © 2013 Wiley Periodicals, Inc. Biopolymers (Pept Sci) 100: 572–583, 2013.