The Drosophila antimicrobial response is one of the best characterized systems of pattern recognition receptor-mediated defense in metazoans. Drosophila senses Gram-negative bacteria via two peptidoglycan recognition proteins (PGRPs), membrane-bound PGRP-LC and secreted/cytosolic PGRP-LE, which relay diaminopimelic acid (DAP)-type peptidoglycan sensing to the Imd signaling pathway. In the case of PGRP-LC, differential splicing of PGRP domain-encoding exons to a common intracellular domain-encoding exon generates three receptor isoforms, which differ in their peptidoglycan binding specificities. In this study, we used Phi31-mediated recombineering to generate fly lines expressing specific isoforms of PGRP-LC and assessed the tissue-specific roles of PGRP-LC isoforms and PGRP-LE in the antibacterial response. Our in vivo studies demonstrate the key role of PGRP-LCx in sensing DAP-type peptidoglycan-containing Gram-negative bacteria or Gram-positive bacilli during systemic infection. We also highlight the contribution of PGRP-LCa/x heterodimers to the systemic immune response to Gram-negative bacteria through sensing of tracheal cytotoxin (TCT), whereas PGRP-LCy may have a minor role in antagonizing the immune response. Our results reveal that both PGRP-LC and PGRP-LE contribute to the intestinal immune response, with a predominant role of cytosolic PGRP-LE in the midgut, the central section of endodermal origin where PGRP-LE is enriched. Our in vivo model also definitively establishes TCT as the long-distance elicitor of systemic immune responses to intestinal bacteria observed in a loss-of-tolerance model. In conclusion, our study delineates how a combination of extracellular sensing by PGRP-LC isoforms and intracellular sensing through PGRP-LE provides sophisticated mechanisms to detect and differentiate between infections by different DAP-type bacteria in Drosophila.