During peptidoglycan recycling (PR) bacteria can recover extracellular fragments of peptidoglycan (PGN) liberated by peptidoglycan turnover (PT) during cell growth and division, and reuse them in cell wall biosynthesis or central carbon metabolism. In Gram-negative bacteria, PR has been well studied, and functions in the induction of resistance to certain classes of antibiotics, and in host-pathogen interaction. However, while Gram-negative cell envelope architecture allows for highly efficient PR, Gram-positive bacteria, which lack an outer cell membrane and are instead enclosed by a glycopolymer layer, can shed large quantities of PGN-derived material to the external environment during growth. Nonetheless, the occurrence of PR was recently demonstrated in several Gram-positive bacteria, including the Gram-positive bacterial pathogen Staphylococcus aureus, and its potential adaptive functions are largely unexplored. Given the known roles of PR in Gram-negative bacteria, and that Gram-positive bacteria include several important human pathogens, we asked what role PR may play during Gram-positive pathogen-host interaction. Using the model insect host Drosophila melanogaster, we demonstrate that S. aureus mutants impaired in extracellular PGN hydrolysis (Δatl) and PGN fragment uptake (ΔmurP) show differential virulence compared to their wild-type counterpart. This was linked to increased activation of the D. melanogaster Toll-cascade by spent supernatant from the Δatl mutant. Thus, we propose that S. aureus, and potentially other Gram-positive bacteria, may use extracellular PGN degradation during PT to simultaneously process PGN fragments for recycling and for immune evasion, while recovery and metabolism of peptidoglycan fragments during PR may play more subtle roles in determining virulence.