NOD2, a NOD-like receptor (NLR), is an intracellular sensor of bacterial muramyl dipeptide (MDP) that was suggested to promote secretion of the proinflammatory cytokine IL-1β. Yet, the molecular mechanism by which NOD2 can stimulate IL-1β secretion, and its biological significance were heretofore unknown. We found that NOD2 through its N-terminal caspase recruitment domain directly binds and activates caspase-1 to trigger IL-1β processing and secretion in MDP-stimulated macrophages, whereas the C-terminal leucine-rich repeats of NOD2 prevent caspase-1 activation in nonstimulated cells. MDP challenge induces the association of NOD2 with another NLR protein, NALP1, and gel filtration analysis revealed the formation of a complex consisting of NOD2, NALP1, and caspase-1. Importantly, Bacillus anthracis infection induces IL-1β secretion in a manner that depended on caspase-1 and NOD2. In vitro, Anthrax lethal toxin strongly potentiated IL-1β secretion, and that response was NOD2 and caspase-1-dependent. Thus, NOD2 plays a key role in the B. anthracis-induced inflammatory response by being a critical mediator of IL-1β secretion.