The Toll family of receptors is required for innate immune response to pathogen-associated molecules, but the mechanism of signaling is not entirely clear. In Drosophila the prototypic Toll regulates both embryonic development and adult immune response. We demonstrate here that the host protein Spatzle can function as a ligand for Toll because Spatzle forms a complex with Toll in transgenic fly extracts and stimulates the expression of a Toll-dependent immunity gene, drosomycin, in adult flies. We also show that constitutively active mutants of Toll form multimers that contain intermolecular disulfide linkages. These disulfide linkages are critical for the activity of one of these mutant receptors, indicating that multimerization is essential for the constitutive activity. Furthermore, systematic mutational analysis revealed that a conserved cysteine-containing motif, different from the cysteines used for the intermolecular disulfide linkages, serves as a self-inhibitory module of Toll. Deleting or mutating this cysteine-containing motif leads to constitutive activity. This motif is located just outside the transmembrane domain and may provide a structural hindrance for multimerization and activation of Toll. Together, our results suggest that multimerization may be a regulated, essential step for Toll-receptor activation.