Nod2 activates the NF-kappaB pathway following intracellular stimulation by bacterial products. Recently, mutations in Nod2 have been shown to be associated with Crohn's disease, suggesting a role for bacteria-host interactions in the etiology of this disorder. We show here that Nod2 is a general sensor of peptidoglycan through the recognition of muramyl dipeptide (MDP), the minimal bioactive peptidoglycan motif common to all bacteria. Moreover, the 3020insC frameshift mutation, the most frequent Nod2 variant associated with Crohn's disease patients, fully abrogates Nod2-dependent detection of peptidoglycan and MDP. Together, these results impact on the understanding of Crohn's disease development. Additionally, the characterization of Nod2 as the first pathogen-recognition molecule that detects MDP will help to unravel the well known biological activities of this immunomodulatory compound.