Nucleotide-binding oligomerization domain protein 1 (NOD1) belongs to a family that includes multiple members with NOD and leucine-rich repeats in vertebrates and plants. NOD1 has been suggested to have a role in innate immune responses, but the mechanism involved remains unknown. Here we report that NOD1 mediates the recognition of peptidoglycan derived primarily from Gram-negative bacteria. Biochemical and functional analyses using highly purified and synthetic compounds indicate that the core structure recognized by NOD1 is a dipeptide, gamma-D-glutamyl-meso-diaminopimelic acid (iE-DAP). Murine macrophages deficient in NOD1 did not secrete cytokines in response to synthetic iE-DAP and did not prime the lipopolysaccharide response. Thus, NOD1 mediates selective recognition of bacteria through detection of iE-DAP-containing peptidoglycan.