The Drosophila immune deficiency (IMD) pathway, homologous to the mammalian tumor necrosis factor (TNF‐α) signaling pathway, initiates antimicrobial peptide (AMP) production in response to infection by gram‐negative bacteria. A membrane‐spanning peptidoglycan recognition protein, PGRP‐LC, functions as the receptor for the IMD pathway. This receptor is activated via pattern recognition and binding of monomeric peptidoglycan (DAP‐type PGN) through the PGRP ectodomain. In this article, we show that the receptor PGRP‐LC is down‐regulated in response to Salmonella/Escherichia coli infection but is not affected by Staphylococcus infection in vivo, and an ectodomain‐deleted PGRP‐LC lacking the PGRP domain is an active receptor. We show that the receptor PGRP‐LC regulates and integrates two host defense systems: the AMP production and melanization. A working model is proposed in which pathogen invasion and tissue damage may be monitored through the receptor integrity of PGRP‐LC after host and pathogen are engaged via pattern recognition. The irreversible cleavage or down‐regulation of PGRP‐LC may provide an additional cue for the host to distinguish pathogenic microbes from nonpathogenic ones and to subsequently activate multiple host defense systems in Dro‐sophila, thereby effectively combating bacterial infection and initiating tissue repair.—Schmidt, R. L., Trejo, T. R., Plummer, T. B., Platt, J. L., Tang, A. H. Infection‐induced proteolysis of PGRP‐LC controls the IMD activation and melanization cascades in Drosophila. FASEB J . 22, 918–929 (2008)