Insulin and IGF signaling play important roles during development and growth, but also in the daily life of mature organisms where they regulate metabolism, reproduction, stress responses, aging or lifespan. Despite these critical physiological functions, mechanisms that control insulin production and release are still only partially understood. By showing that modulating expression of a Drosophila neprilysin considerably interferes with proper expression of major insulin-like peptides, we provide novel mechanistic insight into this issue and relate neprilysin activity to the regulation of insulin signaling for the first time. Concomitant phenotypes of impaired Neprilysin 4 expression include reduced body size, premature lethality and characteristic changes in the metabolite composition of respective transgenic animals. Significantly, ectopic expression of a catalytically inactive protein variant does not elicit any of the phenotypes, which proves aberrant enzymatic activity and thus impaired peptide hydrolysis as critical parameter. In a screen for novel substrates of Neprilysin 4 we identified numerous peptides known to be involved in regulating insulin-like peptide expression, feeding behavior, or both, and thereby provide a conclusive explanation for the depicted phenotypes. The high functional conservation of significant factors renders the characterized principles applicable to numerous species, including higher eukaryotes and humans.