Arthrogryposis, renal dysfunction, and cholestasis (ARC) syndrome is a fatal recessive disorder caused by mutations in the VPS33B or VPS16B genes. Both encode homologues of the Vps33p and Vps16p subunits of the HOPS complex necessary for fusions of vacuoles in yeast. Here, we describe a mutation in the full-of-bacteria (fob) gene, which encodes Drosophila Vps16B. Flies null for fob are homozygous viable and fertile. They exhibit, however, a defect in their immune defense that renders them hypersensitive to infections with nonpathogenic bacteria. fob hemocytes (fly macrophages) engulf bacteria but fail to digest them. Phagosomes undergo early steps of maturation and transition to a Rab7-positive stage, but do not mature to fully acidified phagolysosomes. This reflects a specific requirement of fob in the fusion of phagosomes with late endosomes/lysosomes. In contrast, cargo of autophagosomes as well as endosomes exhibit normal lysosomal delivery in fob cells. These findings suggest that defects in phagosome maturation may contribute to symptoms of ARC patients including recurring infections.