In Drosophila and mammals, activation of the innate immune system leads to insulin resistance. Infiltration of macrophages with active Toll-like receptor 4 signaling into obese adipose tissue leads to reduced insulin signaling and metabolic defects in mammals. In Drosophila, expression of constitutively-active Toll10b receptors in the larval fat body activates the innate immune system and leads to reduced Akt activity, and decreases in fat body cell size, triglyceride storage, and whole-animal growth compared with flies expressing control transgenes. Toll signaling disrupts DILP signaling by interfering with phosphorylation of the kinase Akt. However, it is not known whether transcription factors in the Toll signaling pathway are required for the development of insulin resistance. Here we examine the role of the Toll pathway transcription factor and NF-KB homolog Dif in growth regulation in the Drosophila fat body. We find that expression of Toll10b or elevated expression of Dif in the larval fat body is sufficient to induce expression of Toll target genes such as Drosomycin, IM2, Dif, and cactus, as measured by quantitative RT-PCR. Knockdown of Dif in fat bodies expressing Toll10b restores low, wild-type expression of these genes, with the exception of cactus. When Toll10b is expressed in clones of fat body cells, nuclear area and cell size are reduced, phenotype that are reversed by co-expression of constitutively-active myristoylated-Akt. Cell growth phenotypes are also rescued when Dif is knocked down in clones that express Toll10b. Clones of fat body cells expressing constitutively-active PI3K (Dp110CAAX) exhibit massively increased nuclear area, which is completely blocked by co-expression of Toll10b but only partially blocked by elevated expression of Dif. Taken together, these data indicate that the transcription factor Dif is necessary but not sufficient for the Toll signaling pathway to reduce Akt-dependent cell growth. This indicates that an additional factor or factors contribute to growth inhibition even when Dif is over-expressed. This may indicate a requirement for post-translational modification of Dif that is not met unless the Toll pathway is activated at the receptor level or that another transcription factor is activated by Toll signaling for the full response. Further, our data suggest that transcription of unknown genes is likely required for Toll signaling to inhibit DILP signaling. Identification of such genes should shed light on the pathology of inflammation-induced insulin resistance.