The pattern-recognition receptor NOD2 senses bacterial muropeptides to regulate host immunity and maintain homeostasis. Loss-of-function mutations in NOD2 are associated with Crohn's disease (CD), but how the variations in microbial factors influence NOD2 signaling and host pathology is elusive. We demonstrate that the Firmicutes peptidoglycan remodeling enzyme, DL-endopeptidase, increased the NOD2 ligand level in the gut and impacted colitis outcomes. Metagenomic analyses of global cohorts (n = 857) revealed that DL-endopeptidase gene abundance decreased globally in CD patients and negatively correlated with colitis. Fecal microbiota from CD patients with low DL-endopeptidase activity predisposed mice to colitis. Administering DL-endopeptidase, but not an active site mutant, alleviated colitis via the NOD2 pathway. Therapeutically restoring NOD2 ligands with a DL-endopeptidase-producing Lactobacillus salivarius strain or mifamurtide, a clinical analog of muramyl dipeptide, exerted potent anti-colitis effects. Our study suggests that the depletion of DL-endopeptidase contributes to CD pathogenesis through NOD2 signaling, providing a therapeutically modifiable target.