Regulating the nuclear factor-kappaB (NF-kappaB) family of transcription factors is of critical importance to animals, with consequences of misregulation that include cancer, chronic inflammatory diseases and developmental defects. Studies in Drosophila melanogaster have proved fruitful in determining the signals used to control NF-kappaB proteins, beginning with the discovery that the Toll/NF-kappaB pathway, in addition to patterning the dorsal-ventral axis of the fly embryo, defines a major component of the innate immune response in both Drosophila and mammals. Here, we characterize the Drosophila wntD (Wnt inhibitor of Dorsal) gene. We show that WntD acts as a feedback inhibitor of the NF-kappaB homologue Dorsal during both embryonic patterning and the innate immune response to infection. wntD expression is under the control of Toll/Dorsal signalling, and increased levels of WntD block Dorsal nuclear accumulation, even in the absence of the IkappaB homologue Cactus. The WntD signal is independent of the common Wnt signalling component Armadillo (beta-catenin). By engineering a gene knockout, we show that wntD loss-of-function mutants have immune defects and exhibit increased levels of Toll/Dorsal signalling. Furthermore, the wntD mutant phenotype is suppressed by loss of zygotic dorsal. These results describe the first secreted feedback antagonist of Toll signalling, and demonstrate a novel Wnt activity in the fly.