Systemic therapy of Gram-negative sepsis remains challenging. Polymyxin B (PMB) is well suited for sepsis therapy due to the endotoxin affinity and antibacterial activity. However, the dose-limiting toxicity has limited its systemic use in sepsis patients. For safe systemic use of PMB, we have developed a nanoparticulate system, called D-TZP, which selectively reduces the toxicity to mammalian cells but retains the therapeutic activities of PMB. D-TZP consists of an iron-complexed tannic acid nanocapsule containing a vitamin D core, coated with PMB and a chitosan derivative that controls the interaction of PMB with endotoxin, bacteria, and host cells. D-TZP attenuated the membrane toxicity associated with PMB but retained the ability of PMB to inactivate endotoxin and kill Gram-negative bacteria. Upon intravenous injection, D-TZP protected animals from pre-established endotoxemia and polymicrobial sepsis, showing no systemic toxicities inherent to PMB. These results support D-TZP as a safe and effective systemic intervention of sepsis.