Innate immune recognition of microbes is a complex process that can be influenced by both the host and the microbe. Drosophila uses two distinct immune signaling pathways, the Toll and immune deficiency (Imd) pathways, to respond to different classes of microbes. The Toll pathway is predominantly activated by Gram-positive bacteria and fungi, while the Imd pathway is primarily activated by Gram-negative bacteria. Recent work has suggested that this differential activation is achieved through peptidoglycan recognition protein (PGRP)-mediated recognition of specific forms of peptidoglycan (PG). In this study, we have further analyzed the specific PG molecular requirements for Imd activation through the pattern recognition receptor PGRP-LC in both cultured cell line and in flies. We found that two signatures of Gram-negative PG, the presence of diaminopimelic acid in the peptide bridge and a 1,6-anhydro form of N-acetylmuramic acid in the glycan chain, allow discrimination between Gram-negative and Gram-positive bacteria. Our results also point to a role for PG oligomerization in Imd activation, and we demonstrate that elements of both the sugar backbone and the peptide bridge of PG are required for optimum recognition. Altogether, these results indicate multiple requirements for efficient PG-mediated activation of the Imd pathway and demonstrate that PG is a complex immune elicitor.