Systemic and tissue-specific insulin resistance have been described in , and are accompanied by many indicators of metabolic disease. The downstream mediators of insulin-resistant pathophysiology remain unclear. We analyzed insulin signaling in the fat body using loss- and gain-of-function. When expression of the sole Insulin receptor (InR) was reduced in larval fat bodies, animals exhibited developmental delay and reduced size in a diet-dependent manner. Fat body InR knockdown also led to reduced survival on high-sugar diets. To look downstream of InR at potential mediators of insulin resistance, RNA-seq studies in insulin-resistant fat bodies revealed differential expression of genes, including those involved in innate immunity. Obesity-associated insulin resistance led to increased susceptibility of flies to infection, as in humans. Reduced innate immunity was dependent on fat body InR expression. The peptidoglycan recognition proteins (PGRPs) PGRP-SB2 and PGRP-SC2 were selected for further study based on differential expression studies. Downregulating PGRP-SB2 selectively in the fat body protected animals from the deleterious effects of overnutrition, whereas downregulating PGRP-SC2 produced InR-like phenotypes. These studies extend earlier work linking the immune and insulin signaling pathways and identify new targets of insulin signaling that could serve as potential drug targets to treat type 2 diabetes.