Both peptidoglycan and muropeptides potently modulate inflammatory and innate immune responses. The secreted Listeria monocytogenes p60 autolysin digests peptidoglycan and promotes bacterial infection in vivo. Here, we report that p60 contributes to bacterial subversion of NK cell activation and innate IFN-γ production. L. monocytogenes deficient for p60 (Δp60) competed well for expansion in mice doubly deficient for IFNAR1 and IFN-γR1 or singly deficient for IFN-γR1, but not in wild-type, IFNAR1−/−, or TLR2−/− mice. The restored competitiveness of p60-deficient bacteria suggested a specific role for p60 in bacterial subversion of IFN-γ-mediated immune responses, since in vivo expansion of three other mutant L. monocytogenes strains (ΔActA, ΔNamA, and ΔPlcB) was not complemented in IFN-γR1−/− mice. Bacterial expression of p60 was not required to induce socs1, socs3, and il10 expression in infected mouse bone marrow macrophages but did correlate with enhanced production of IL-6, IL-12p70, and most strikingly IFN-γ. The primary source of p60-dependent innate IFN-γ was NK cells, whereas bacterial p60 expression did not significantly alter innate IFN-γ production by T cells. The mechanism for p60-dependent NK cell stimulation was also indirect, given that treatment with purified p60 protein failed to directly activate NK cells for IFN-γ production. These data suggest that p60 may act on infected cells to indirectly enhance NK cell activation and increase innate IFN-γ production, which presumably promotes early bacterial expansion through its immunoregulatory effects on bystander cells. Thus, the simultaneous induction of IFN-γ production and factors that inhibit IFN-γ signaling may be a common strategy for misdirection of early antibacterial immunity.