Insulin-degrading enzyme (IDE) degrades insulin and other peptides, including the Aβ peptide of Alzheimer's disease. However, the mechanism by which IDE acts on its substrates in vivo is unclear, and its role in pathogenesis of type 2 diabetes and Alzheimer's disease is controversial. Here, we show that in Drosophila knocking down IDE in insulin-producing cells (IPCs) of the brain results in increased body weight and fecundity, decreased circulating sugar levels, and reduced lifespan. Moreover, knocking down and over-expressing IDE in IPCs have opposite physiological effects. As mis-regulated insulin signaling in peripheral tissues is known to cause similar phenotypes, our data suggest a role for Drosophila IDE in determining the level of insulin-like peptides made by IPCs that systemically activate insulin signaling.