The serine protease cathepsin G (EC 3.4.21.20; Cat G), which is stored in the azurophilic granules of neutrophils (polymorphonuclear leukocytes) and released on degranulation, has been implicated in various pathological conditions associated with inflammation. By employing high-throughput screening, we identified β-ketophosphonic acid 1 as a moderate inhibitor of Cat G (IC₅₀ = 4.1 μM). We were fortunate to obtain a cocrystal of 1 with Cat G and solve its structure by X-ray crystallography (3.5 Å). Structural details from the X-ray analysis of 1·Cat G served as a platform for optimization of this lead compound by structure-based drug design. With the aid of molecular modeling, substituents were attached to the 3-position of the 2-naphthyl ring of 1, which occupies the S1 pocket of Cat G, to provide an extension into the hydrophobic S3 region. Thus, we arrived at analogue 7 with an 80-fold potency improvement over 1 (IC₅₀ = 53 nM). From these results, it is evident that the β-ketophosphonic acid unit can form the basis for a novel class of serine protease inhibitors.