Intracellular signaling regulators can be concentrated into membrane-free, higher ordered protein assemblies to initiate protective responses during stress - a process known as phase transition. Here, we show that a phase transition of the Caenorhabditis elegans Toll/interleukin-1 receptor domain protein (TIR-1), an NAD(+) glycohydrolase homologous to mammalian sterile alpha and TIR motif-containing 1 (SARM1), underlies p38 PMK-1 immune pathway activation in C. elegans intestinal epithelial cells. Through visualization of fluorescently labeled TIR-1/SARM1 protein, we demonstrate that physiologic stresses, both pathogen and non-pathogen, induce multimerization of TIR-1/SARM1 into visible puncta within intestinal epithelial cells. In vitro enzyme kinetic analyses revealed that, like mammalian SARM1, the NAD(+) glycohydrolase activity of C. elegans TIR-1 is dramatically potentiated by protein oligomerization and a phase transition. Accordingly, C. elegans with genetic mutations that specifically block either multimerization or the NAD(+) glycohydrolase activity of TIR-1/SARM1 fail to induce p38 PMK phosphorylation, are unable to increase immune effector expression, and are dramatically susceptible to bacterial infection. Finally, we demonstrate that a loss-of-function mutation in nhr-8, which alters cholesterol metabolism and is used to study conditions of sterol deficiency, causes TIR-1/SARM1 to oligomerize into puncta in intestinal epithelial cells. Cholesterol scarcity increases p38 PMK-1 phosphorylation, primes immune effector induction in a manner that requires TIR-1/SARM1 oligomerization and its intrinsic NAD(+) glycohydrolase activity, and reduces pathogen accumulation in the intestine during a subsequent infection. These data reveal a new adaptive response that allows a metazoan host to anticipate pathogen threats during cholesterol deprivation, a time of relative susceptibility to infection. Thus, a phase transition of TIR-1/SARM1 as a prerequisite for its NAD(+) glycohydrolase activity is strongly conserved across millions of years of evolution and is essential for diverse physiological processes in multiple cell types.