Variants of NOD2, an intracellular sensor of bacteria-derived muramyl dipeptide (MDP), increase susceptibility to Crohn's disease (CD). These variants are thought to be defective in activation of nuclear factor kappaB (NF-kappaB) and antibacterial defenses, but CD clinical specimens display elevated NF-kappaB activity. To illuminate the pathophysiological function of NOD2, we introduced such a variant to the mouse Nod2 locus. Mutant mice exhibited elevated NF-kappaB activation in response to MDP and more efficient processing and secretion of the cytokine interleukin-1beta (IL-1beta). These effects are linked to increased susceptibility to bacterial-induced intestinal inflammation and identify NOD2 as a positive regulator of NF-kappaB activation and IL-1beta secretion.