In this study, we describe a Drosophila melanogaster transposon insertion mutant with tolerance to Vibrio cholerae infection and markedly decreased transcription of diptericin as well as other genes regulated by the immune deficiency innate immunity signaling pathway. We present genetic evidence that this insertion affects a locus previously implicated in pupal eclosion. This genetic locus, which we have named mustard (mtd), contains a LysM domain, often involved in carbohydrate recognition, and a TLDc domain of unknown function. More than 20 Mtd isoforms containing one or both of these conserved domains are predicted. We establish that the mutant phenotype represents a gain of function and can be replicated by increased expression of a short, nuclearly localized Mtd isoform comprised almost entirely of the TLDc domain. We show that this Mtd isoform does not block Relish cleavage or translocation into the nucleus. Lastly, we present evidence suggesting that the eclosion defect previously attributed to the Mtd locus may be the result of the unopposed action of the NF-κB homolog, Relish. Mtd homologs have been implicated in resistance to oxidative stress. However, to our knowledge this is the first evidence that Mtd or its homologs alter the output of an innate immunity signaling cascade from within the nucleus.