The nucleotide oligomerization domain (NOD)-like receptors 1 and 2 (NOD1/2) are intracellular pattern-recognition proteins that activate immune signaling pathways in response to peptidoglycans associated with microorganisms. Recruitment to bacteria-containing endosomes and other intracellular membranes is required for NOD1/2 signaling, and NOD1/2 mutations that disrupt membrane localization are associated with inflammatory bowel disease and other inflammatory conditions. However, little is known about this recruitment process. We found that NOD1/2 S-palmitoylation is required for membrane recruitment and immune signaling. ZDHHC5 was identified as the palmitoyltransferase responsible for this critical posttranslational modification, and several disease-associated mutations in NOD2 were found to be associated with defective S-palmitoylation. Thus, ZDHHC5-mediated S-palmitoylation of NOD1/2 is critical for their ability to respond to peptidoglycans and to mount an effective immune response.