Tsetse flies, the sole vectors of African trypanosomes, have coevolved with mutualistic endosymbiont Wigglesworthia glossinidiae. Elimination of Wigglesworthia renders tsetse sterile and increases their trypanosome infection susceptibility. We show that a tsetse peptidoglycan recognition protein (PGRP-LB) is crucial for symbiotic tolerance and trypanosome infection processes. Tsetse pgrp-lb is expressed in the Wigglesworthia-harboring organ (bacteriome) in the midgut, and its level of expression correlates with symbiont numbers. Adult tsetse cured of Wigglesworthia infections have significantly lower pgrp-lb levels than corresponding normal adults. RNA interference (RNAi)-mediated depletion of pgrp-lb results in the activation of the immune deficiency (IMD) signaling pathway and leads to the synthesis of antimicrobial peptides (AMPs), which decrease Wigglesworthia density. Depletion of pgrp-lb also increases the host's susceptibility to trypanosome infections. Finally, parasitized adults have significantly lower pgrp-lb levels than flies, which have successfully eliminated trypanosome infections. When both PGRP-LB and IMD immunity pathway functions are blocked, flies become unusually susceptible to parasitism. Based on the presence of conserved amidase domains, tsetse PGRP-LB may scavenge the peptidoglycan (PGN) released by Wigglesworthia and prevent the activation of symbiont-damaging host immune responses. In addition, tsetse PGRP-LB may have an anti-protozoal activity that confers parasite resistance. The symbiotic adaptations and the limited exposure of tsetse to foreign microbes may have led to the considerable differences in pgrp-lb expression and regulation noted in tsetse from that of closely related Drosophila. A dynamic interplay between Wigglesworthia and host immunity apparently is influential in tsetse's ability to transmit trypanosomes.