Peptidoglycan recognition proteins (PGRPs) play important roles in the innate immune defence. Each PGRP detects a distinct subset of peptidoglycans and initiate immune signalling or enzymatic degradation of peptidoglycans. Here we characterize one of the 13 Drosophila PGRPs, PGRP-LF. PGRP-LF is membrane bound and has its two PGRP domains, z and w, localized outside the cell. Our data demonstrate that the z-and w-domain differ in their affinities to peptidoglycan. The z-domain has affinity to several groups of peptidoglycans while the w-domain only recognizes peptidoglycan from Escherichia coli. In addition, we observed that overexpression of PGRP-LF in Drosophila melanogaster Schneider 2 cells (S2 cells) promotes aggregation of cells. Furthermore, following immune stimulation of S2 cells overexpressing PGRP-LF, we noticed a reduced up-regulation of expression of antimicrobial peptide genes, in consonance with an immune suppressive role for PGRP-LF.