Purpose: To redesign a complement-inhibiting peptide with the potential to become a therapeutic for dry and wet age-related macular degeneration (AMD). Methods: We present a new potent peptide (Peptide 2) of the compstatin family. The peptide is developed by rational design, based on a mechanistic binding hypothesis, and structural and physicochemical properties derived from molecular dynamics (MD) simulation. The inhibitory activity, efficacy, and solubility of Peptide 2 are evaluated using a hemolytic assay, a human RPE cell–based assay, and ultraviolet (UV) absorption properties, respectively, and compared to the respective properties of its parent peptide (Peptide 1). Results: The sequence of Peptide 2 contains an arginine-serine N-terminal extension (a characteristic of parent Peptide 1) and a novel 8-polyethylene glycol (PEG) block C-terminal extension. Peptide 2 has significantly improved aqueous solubility compared to Peptide 1 and comparable complement inhibitory activity. In addition, Peptide 2 is more efficacious in inhibiting complement activation in a cell-based model that mimics the pathobiology of dry AMD. Conclusions: We have designed a new peptide analog of compstatin that combines N-terminal polar amino acid extensions and C-terminal PEGylation extensions. This peptide demonstrates significantly improved aqueous solubility and complement inhibitory efficacy, compared to the parent peptide. The new peptide overcomes the aggregation limitation for clinical translation of previous compstatin analogs and is a candidate to become a therapeutic for the treatment of AMD.