ML (MD-2 (myeloid differentiation factor-2)-related Lipid-recognition) is a conserved domain identified in MD-2, MD-1, NPC2 (Niemann-Pick disease type C2), and mite major allergen protein from animals, plants, and fungi. Vertebrate members of the ML family proteins, such as NPC2 and MD-2, play important roles in lipid metabolism and immune signaling pathway. MD-2 is an essential co-receptor in the lipopolysaccharide (LPS)/Toll-like receptor 4 (TLR4) signaling pathway. Insects contain multiple ML genes, arbitrarily named md-2- or npc2-like genes. However, whether insect ML genes have functions similar to vertebrate md-2 is unknown. In Drosophila melanogaster, there are eight npc2 genes (npc2a-h), and they can be further divided into three subgroups based on the numbers of cysteine residues (6, 7 and 8 Cys) in the mature proteins. The purpose of this study is to investigate whether any Drosophila npc2 genes may have functions in immune signaling pathways. We chose npc2a, npc2e and npc2h genes representing the three subgroups for this study. We showed that recombinant NPC2a, NPC2e and NPC2h not only bound to LPS and lipid A, but also bound to peptidoglycan (PG) and lipoteichoic acid (LTA), a property that has not been reported previously for vertebrate NPC2 or MD-2. More importantly, we showed that over-expression of NPC2a and NPC2e activated diptericin promoter reporter in S2 cells stimulated by PG, suggesting that NPC2e and NPC2a may play a role in the immune deficiency (Imd) pathway. This is the first in vitro study about NPC2 proteins in innate immunity of D. melanogaster.