Insects rely on innate immune mechanisms to defend themselves against microbes. The inducible anti-microbial peptides constitute an important arm of this defense. In Drosophila, the Toll and the Imd pathways are the major routes to induce the peptides, and it has become clear that to a certain extent, these pathways can discriminate between different microbes and mount an appropriate response to eliminate the intruder. This review discusses the proteins responsible for this discriminatory recognition, the peptidoglycan recognition proteins (PGRPs). The serum protein PGRP-SA triggers a humoral cascade of proteases upon infection by certain gram-positive bacteria to activate the Toll pathway. The membrane-bound receptor PGRP-LC activates the Imd pathway in response to certain gram-negative bacteria or their peptidoglycans. Other PGRPs have enzymatic activity, cleaving lactylamide bonds in peptidoglycan to eliminate its immunogenicity, thus turning off the immune response. The PGRP family is conserved from insects to man. Short mammalian PGRP variants are synthesized in neutrophils and stored in granules. These PGRPs seem to influence the survival of phagocytosed non-pathogenic bacteria. Long PGRP variants are expressed in the liver and secreted into the bloodstream where their peptidoglycan-degrading activity might serve scavenger functions.