Altered intestinal permeability and dysfunctional tight junctions (TJ) have been implicated in several autoimmune diseases including celiac disease (CeD). Elevated intestinal permeability leads to additional gluten exposure resulting in a sustained inflammatory loop which has a pivotal role in the pathogenesis of CeD. In this study, we investigated the effect of larazotide acetate (AT-1001), an 8-mer tight junction modulator peptide, on the permeability caused by factors secreted from pepsintrypsin digested gliadin (PT-gliadin) stimulated human PBMC or recombinant cytokines. Treatment of human PBMC with PT-gliadin increased the production of several pro-inflammatory cytokines including TNF-α, IFN-γ, and IL-1β. Basolateral application of this supernatant resulted in an increase in Lucifer Yellow (LY) permeability. We show that larazotide acetate inhibited PT-gliadin activated PBMC supernatants or mixture of proinflammatory cytokines (TNF-α, IFN-γ, and IL-1β)- induced increase in LY permeability in Caco-2 assay. Larazotide acetate also inhibited the transport of immune reactive 9-mer, 13-mer gliadin peptides across a Caco-2 monolayer. Finally, in a double transgenic (HCD4+/HLA/DQ8+) mouse CeD model, oral administration of larazotide acetate prior to oral gliadin treatment blocked intestinal changes such as macrophage accumulation, and intestinal permeability. These results suggest that larazotide acetate can effectively disrupt the pathogenic intestinal “permeability-inflammatory loop” by inhibition of gliadin peptide transport and inhibition of cytokine induced permeability.