Optimal regulation of the innate immune receptor nucleotide-binding oligomerization domain-containing protein 2 (NOD2) is essential for controlling bacterial infections and inflammatory disorders. Chronic NOD2 stimulation induces non-responsiveness to restimulation, termed NOD2-induced tolerance. Although the levels of the NOD2 adaptor, RIP2, are reported to regulate both acute and chronic NOD2 signalling, how RIP2 levels are modulated is unclear. Here we show that ZNRF4 induces K48-linked ubiquitination of RIP2 and promotes RIP2 degradation. A fraction of RIP2 localizes to the endoplasmic reticulum (ER), where it interacts with ZNRF4 under either unstimulated and muramyl dipeptide-stimulated conditions. Znrf4 knockdown monocytes have sustained nuclear factor kappa-light-chain-enhancer of activated B cells (NF-κB) activation, and Znrf4 knockdown mice have reduced NOD2-induced tolerance and more effective control of Listeria monocytogenes infection. Our results thus demonstrate E3-ubiquitin ligase ZNRF4-mediated RIP2 degradation as a negative regulatory mechanism of NOD2-induced NF-κB, cytokine and anti-bacterial responses in vitro and in vivo, and identify a ZNRF4-RIP2 axis of fine-tuning NOD2 signalling to promote protective host immunity.