Phenoloxidase (PO) is believed to be a key mediator of immune function in insects and has been implicated both in non-self recognition and in resistance to a variety of parasites and pathogens, including baculoviruses and parasitoids. Using larvae of the Egyptian cotton leafworm, Spodoptera littoralis, we found that despite its apparent importance, haemolymph PO activity varied markedly between individuals, even amongst insects reared under apparently identical conditions. Sib-analysis methods were used to determine whether individuals varied genetically in their PO activity, and hence in one aspect of immune function. The heritability estimate of haemolymph PO activity was high (h2 = 0.690 0.069), and PO activity in the haemolymph was strongly correlated with PO activity in both the cuticle and midgut; the sites of entry for most parasites and pathogens. Haemolymph PO activity was also strongly correlated with the degree to which a synthetic parasite (a small piece of nylon monofilament) was encapsulated and melanized (r = 0.622 0.142), suggesting that the encapsulation response is also heritable. The mechanism maintaining this genetic variation has yet to be elucidated.