Phagocytic blood cells are critical to innate immune defense: They internalize and destroy microbial invaders and produce signals that trigger other immune responses. Despite this central role, the in vivo contributions of phagocytosis to systemic immune activation are not well understood. Drosophila has proven a fruitful model for the investigation of evolutionarily conserved innate immune mechanisms, including NF-kappaB-dependent transcriptional induction, RNAi in antiviral responses, and phagocytosis. The phagocytes of Drosophila encounter bacterial invaders early in infection and contribute to survival of infection. Phagocytosis in flies and mammals is highly homologous: Both rely on scavenger receptors, opsonins, and actin rearrangements for engulfment; have phagosomal cysteine proteases active at low pH; and can be subverted by similar intracellular pathogens. Although the role of Drosophila phagocytes in the activation of other immune tissues has not been clear, we show that induction of the antibacterial-peptide gene Defensin in the fat body during infection requires blood-cell contributions. We identify a gene, psidin, that encodes a lysosomal protein required in the blood cells for both degradation of engulfed bacteria and activation of fat-body Defensin. These data establish a role for the phagocytic blood cells of Drosophila in detection of infection and activation of the humoral immune response.