Obstruction of bile flow results in bacterial proliferation and mucosal injury in the small intestine that can lead to the translocation of bacteria across the epithelial barrier and systemic infection. These adverse effects of biliary obstruction can be inhibited by administration of bile acids. Here we show that the farnesoid X receptor (FXR), a nuclear receptor for bile acids, induces genes involved in enteroprotection and inhibits bacterial overgrowth and mucosal injury in ileum caused by bile duct ligation. Mice lacking FXR have increased ileal levels of bacteria and a compromised epithelial barrier. These findings reveal a central role for FXR in protecting the distal small intestine from bacterial invasion and suggest that FXR agonists may prevent epithelial deterioration and bacterial translocation in patients with impaired bile flow.