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Muramidases constitute a superfamily of enzymes that hydrolyse peptidoglycan (PGN) from bacterial cell walls. Recently, a fungal muramidase derived from Acremonium alcalophilum has been shown to increase broiler performance when added as a feed additive. However, the underlying mechanisms of action are not yet identified. Here, we investigated the hypothesis that this muramidase can cleave PGN to muramyl dipeptide (MDP), activating nucleotide-binding oligomerisation domain-containing protein 2 (NOD2) receptors in eukaryotic cells, potentially inducing anti-inflammatory host responses. Using Micrococcus luteus as a test bacterium, it was shown that muramidase from A. alcalophilum did not display antimicrobial activity, while it could cleave fluorescently labelled PGN. It was shown that the muramidase could degrade PGN down to its minimal bioactive structure MDP by using UPLC-MS/MS. Using HEK-Blue™-hNOD2 reporter cells, it was shown that the muramidase-treated PGN degradation mixture could activate NOD2. Muramidase supplementation to broiler feed increased the duodenal goblet cell and intraepithelial lymphocyte abundance while reducing duodenal wall CD3+ T lymphocyte levels. Muramidase supplementation to broiler feed only had moderate effects on the duodenal, ileal and caecal microbiome. It was shown that the newly discovered muramidase hydrolysed PGN, resulting in MDP that activates NOD2, potentially steering the host response for improved intestinal health. [ABSTRACT FROM AUTHOR]