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Parasitic nematodes cause significant morbidity and mortality globally. Excretory/secretory products (ESPs) such as fatty acid- and retinol- binding proteins (FARs) are hypothesized to suppress host immunity during nematode infection, yet little is known about their interactions with host tissues. Leveraging the insect parasitic nematode, Steinernema carpocapsae, we describe here the first in vivo study demonstrating that FARs modulate animal immunity, causing an increase in susceptibility to bacterial co-infection. Moreover, we show that FARs dampen key components of the fly immune response including the phenoloxidase cascade and antimicrobial peptide (AMP) production. Our data also reveal that FARs deplete lipid signaling precursors in vivo as well as bind to these fatty acids in vitro, suggesting that FARs elicit their immunomodulatory effects by altering the availability of lipid signaling molecules necessary for an efficient immune response. Collectively, these data support a complex role for FARs in immunosuppression in animals and provide detailed mechanistic insight into parasitism in phylum Nematoda.