AbstractThe Drosophila IAP protein, DIAP2, is a key mediator of NF-κB signalling and is required for immune activation, both locally in the intestinal epithelia and during systemic, fat body-induced responses. We have found that transgenic expression of DIAP2 induces inflammation in the intestine, but not in the fat body, indicating a need for regulating DIAP2 in microbiotic environments. We describe the Drosophila caspase drICE, a known interaction partner of DIAP2, as a regulator of DIAP2 and NF-κB signalling in the intestinal epithelium. drICE acts by cleaving, and interfering with DIAP2’s ability to ubiquitinate and, thereby, activate mediators of the NF-κB pathway. The drICE-cleaved form of DIAP2 is, moreover, unable to induce inflammation during basal conditions in the intestine. Interestingly, cleavage of DIAP2 does not interfere with pathogen-induced signalling, suggesting that drICE protects from immune responses induced by resident microbes. Accordingly, the negative regulatory effect of drICE is lost when rearing flies axenic. Hence, we show that drICE halts unwanted inflammatory signalling in the intestine by forming an inhibitory complex with DIAP2, interfering with the ability of DIAP2 to induce downstream signalling and NF-κB target gene activation.