Post-translational modifications such as ubiquitination play a key role in regulation of inflammatory nuclear factor-κB (NF-κB) signalling. The Drosophila IκB kinase γ (IKKγ) Kenny is a central regulator of the Drosophila Imd pathway responsible for activation of the NF-κB Relish. We found the Drosophila E3 ligase and HOIL-1L interacting protein (HOIP) orthologue linear ubiquitin E3 ligase (LUBEL) to catalyse formation of M1-linked linear ubiquitin (M1-Ub) chains in flies in a signal-dependent manner upon bacterial infection. Upon activation of the Imd pathway, LUBEL modifies Kenny with M1-Ub chains. Interestingly, the LUBEL-mediated M1-Ub chains seem to be targeted both directly to Kenny and to K63-linked ubiquitin chains conjugated to Kenny by DIAP2. This suggests that DIAP2 and LUBEL work together to promote Kenny-mediated activation of Relish. We found LUBEL-mediated M1-Ub chain formation to be required for flies to survive oral infection with Gram-negative bacteria, for activation of Relish-mediated expression of antimicrobial peptide genes and for pathogen clearance during oral infection. Interestingly, LUBEL is not required for mounting an immune response against systemic infection, as Relish-mediated antimicrobial peptide genes can be expressed in the absence of LUBEL during septic injury. Finally, transgenic induction of LUBEL-mediated M1-Ub drives expression of antimicrobial peptide genes and hyperplasia in the midgut in the absence of infection. This suggests that M1-Ub chains are important for Imd signalling and immune responses in the intestinal epithelia, and that enhanced M1-Ub chain formation is able to drive chronic intestinal inflammation in flies.