Recent studies of peptidoglycan recognition protein (PGRP) have shown that 2 of the 13 Drosophila PGRP genes encode proteins that function as receptors mediating immune responses to bacteria. We show here that another member, PGRP-SC1B, has a totally different function because it has enzymatic activity and thereby can degrade peptidoglycan. A mass spectrometric analysis of the cleavage products demonstrates that the enzyme hydrolyzes the lactylamide bond between the glycan strand and the cross-linking peptides. This result assigns the protein as an N-acetylmuramoyl-l-alanine amidase (EC ), and the corresponding gene is thus the first of this class to be described from a eukaryotic organism. Mutant forms of PGRP-SC1B lacking a potential zinc ligand are enzymatically inactive but retain their peptidoglycan affinity. The immunostimulatory properties of PGRP-SC1B-degraded peptidoglycan are much reduced. This is in striking contrast to lysozyme-digested peptidoglycan, which retains most of its elicitor activity. This points toward a scavenger function for PGRP-SC1B. Furthermore, a sequence homology comparison with phage T7 lysozyme, also an N-acetylmuramoyl-l-alanine amidase, shows that as many as six of the Drosophila PGRPs could belong to this class of proteins.