The enteric gamma-proteobacterium Photorhabdus luminescens kills a wide range of insects, whilst also maintaining a mutualistic relationship with soil nematodes from the family Heterorhabditis. Pathogenicity is associated with bacterial exponential growth, whilst mutualism is associated with post-exponential (stationary) phase. During post-exponential growth, P. luminescens also elaborates an extensive secondary metabolism, including production of bioluminescence, antibiotics and pigment. However, the regulatory network that controls the expression of this secondary metabolism is not well understood. The stringent response is a well-described global regulatory system in bacteria and mediated by the alarmone (p)ppGpp. In this study, we disrupted the genes relA and spoT, encoding the two predicted (p)ppGpp synthases of P. luminescens TTO1, and we showed that (p)ppGpp is required for secondary metabolism. Moreover, we found the (p)ppGpp is not required for pathogenicity of P. luminescens, but is required for bacterial survival within the insect cadaver. Finally, we showed that (p)ppGpp is required for P. luminescens to support normal nematode growth and development. Therefore, the regulatory network that controls the transition from pathogenicity to mutualism in P. luminescens requires (p)ppGpp. This is the first report outlining a role for (p)ppGpp in controlling the outcome of an interaction between a bacteria and its host.