Nod2 has been extensively characterized as a bacterial sensor that induces an antimicrobial and inflammatory gene expression program. Therefore, it is unclear why Nod2 mutations that disrupt bacterial recognition are paradoxically among the highest risk factors for Crohn's disease, which involves an exaggerated immune response directed at intestinal bacteria. Here, we identified several abnormalities in the small-intestinal epithelium of Nod2(-/-) mice including inflammatory gene expression and goblet cell dysfunction, which were associated with excess interferon-γ production by intraepithelial lymphocytes and Myd88 activity. Remarkably, these abnormalities were dependent on the expansion of a common member of the intestinal microbiota Bacteroides vulgatus, which also mediated exacerbated inflammation in Nod2(-/-) mice upon small-intestinal injury. These results indicate that Nod2 prevents inflammatory pathologies by controlling the microbiota and support a multihit disease model involving specific gene-microbe interactions.